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What the Inflation Act Means For You? Thumbnail

What the Inflation Act Means For You?

The Inflation Reduction Act of 2022, is designed to reduce the deficit and lower inflation while investing in domestic energy production and lowering healthcare drug costs. It was signed into law on Tuesday, August 16, 2022. In essence, the legislation is a scaled-down version of the Build Back Better Act proposed by the Biden administration in 202.  The legislation is expected to raise $737 billion, require total investments of $437 billion, and result in a US deficit reduction of more than $300 billion.   While the $437 billion package includes many provisions, this article highlights several key areas where you may benefit the most.

  • Prescription Drug Caps - One of the most significant provisions of the Inflation Reduction Act will allow Medicare to negotiate the price of certain prescription drugs for the first time, bringing down the price beneficiaries will pay for their medications. For those companies that refuse to negotiate drug prices with Medicare, a 95% sales tax will be levied. Some changes don’t take effect right away, for example, insulin payments will be limited to $35 per month for Medicare Part D beneficiaries starting next year. Beginning in 2024 overall out-of-pocket drug costs will be limited to $4,000 annually, dropping to $2,000 in 2025. Medicare recipients will have a $2,000 cap on annual out-of-pocket prescription drug costs, starting in 2025

  • Creation of a 15% Corporate Minimum Tax rate - Corporations with at least $1 billion in income will have a new tax rate of 15%. Taxes on individuals and households won’t be increased. Stock buybacks also known as Treasury Stock by corporations will face a 1% excise tax. The Joint Committee on Taxation (JCT) estimates the tax will raise $222 billion in revenue over the next decade

Taking on Climate Change - The legislation calls for a more-than-$300-billion investment in energy and climate reform. This would be the largest federal investment in clean energy in U.S. history. Measures in the bill would invest $60 billion for renewable energy infrastructure, including additional wind turbines and the manufacture of solar panels. The bill includes a 30% tax credit for installing energy-efficient windows, heat pumps, or newer appliances. There’s another tax credit for installing solar panels, and up to $14,000 worth of rebates for upgrading to new, energy-efficient appliances.
  • Expanded EV Tax Credits - If you have an electric vehicle, you’re in luck! New tax credits are immediately available, with up to $4,000 offered for used EVs and up to $7,500 for new EVs. There’s also a tax credit for installing an electric charger in your home (just read the fine print to ensure you qualify).
  • IRS Tax Enforcement - The IRS has been sounding the alarm about being underfunded and being unable to deliver on its duties. The bill invests a total of $80 billion in the nation’s tax agency over the next 10 years. This new funding will in towards hiring additional enforcement agents, providing legal support, and investing in new technology.  In addition about $3.2 billion for taxpayer services such as faster tax return processing, phone support, and a more streamlined e - file system. 

New legislation can come with benefits as well as new complexities. Contact us today to find out how these new provisions may impact you.  

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
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