What is it About:

Signed on August 16 of this year, the Inflation Reduction Act of 2022, (IRA) is said to

have revolutionized the United States social safety. The bill aims at reducing inflation

in the country. IRA is focused on lowering down the deficit by reducing the cost of

prescription drugs and raises corporate taxes. Some of the big and talked about

provisions that the law promises to bring in action is to create a minimum tax rate of

15% for the corporates that earn around $1 billion income. Under the act, Medicare

would be allowed to negotiate the price of specific prescription drugs and will aim at

bringing down the price that will be paid by the beneficiaries. Apart from this,

Medicare beneficiaries will also have a $2.000.00 cap on the yearly costs that they

pay out-of-the-pocket, from year 2025. For the IRS, the bill will invest $80 billion for

the next decade, that is expected to improve the underfunded condition of the

country’s biggest tax agency.

Presently, the medical insurance premiums controlled by the Affordable Care Act are

subsidized by the Federal government to offer low premiums. The subsidies, that

were on the verge of completion towards the end of this year, will also be extended

till the year 2025 as per the IRA. According to a source from the US Department of

Health and Human Services, the move as per the Act has proved to safeguard

health insurance of over 3 million residents of the country, since they could have lost

the insurance had the extension not been implemented. The bill also implemented

multiple investments in the climate protection arena, wherein there have been tax

credits extended for residential users to offset energy cost and save energy. The Act

also offer tax credits for residential users looking out for investment in solar energy

for clean energy, reduced carbon emissions and sustainability, wherein the tax

credits would be offered.

How the Act affects Federal Tax Credits:

The Act promises to offer tax credits for the non-business users through the Non-

business Energy Property Credit, with a new name as the Energy Efficient Home

Improvement Credit. With that being said, the Act, starting from now will offer credit

equivalent to 30% of the costs of all the home improvements eligible under the Act

during the year. The lifetime credit amount on the yearly limit on home energy of

$500.00 will now be replaced by $1,200.00. The IRA has increased the credit

amount with a phaseout of eligible percentage. The amount of credit would be 30%

for the year 2022-2032, 26% for the year 2033 and 22% for the year 2034. The IRA

also extended the Clean Vehicle Credit until the completion of the year 2032 and

created newer credits for vehicles that were previously owned, clean and qualified

under clean and sustainable vehicles.

Summary:

While the IRA makes a multiple number of changes in the Internal Revenue Code

that might not affect your individual taxes on a significant basis, or may not impact

the inflation rate in the country, however the increased and improved tax credits are

surely to save you your hard-earned money that gets spent during the tax season.

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Other References-

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