On August 12, Congress passed the Inflation Reduction Act, over 700 pages of economic changes. What does the Act do? And just as important, what does it not do?
To start with the name, the Act's proponents say the new law will fight inflation with deficit reductions—which makes many people ask, "Will my taxes increase?" The good news is that for the vast number of people, the answer is no. Taxes are changing, but not for average individuals. The two major tax provisions are for corporations:
- 15 percent minimum tax on the profits companies report to shareholders for corporations with over $1 billion in annual revenue
- 1 percent excise tax on corporate share buybacks
The legislation also includes $80 billion for the IRS.
A statement released by Senate Democratic leaders said, "There are no new taxes on families making $400,000 or less and no new taxes on small businesses."
On the plus side
According to an analysis by USA Today, there are some definite benefits for individuals, including:
- An Affordable Care Act subsidy extension through 2025
- Permission for Medicare to negotiate drug prices
- A cap on Medicare recipients' drug expenditures at $2,000 per year
Climate change offerings
The new act also provides:
- Provisions for solar
- Tax credits for buying a new or used electric vehicle, extended until December 2032
- Tax credits on electric commercial vehicles based on size
The vehicle credit is complex. The Treasury Department will be issuing guidance as to how the new rules and limits will apply. R&A will share more details specific to the energy credit in a future newsletter. If you have any immediate questions about how this act may affect you or your business, contact your R&A professional.