Today, we’re going to talk about the Inflation Production Act (or IRA). Before we jump in, it’s important to know that this is meant to be a summary; if you have further questions, feel free to reach out!
Corporate Tax Changes
There are four points that we will cover, and the first is around taxes. There were some tax changes specifically for corporations. For example, there’s now going to be a 15% minimum corporate tax on businesses that have at least $1 billion in profit. Another change is around stock buybacks. When companies go to buy back their stock, there’s going to be an additional 1% tax on that.
Clean Energy Incentives
The next point is around clean energy incentives. So there are two credits out there that are going to be extended to 2032 and to 2034. The crux of these credits is that it’s meant to incentivize individuals to make more energy efficient conscious purchases for their home. So for example, if you buy an energy efficient window or skylight, you might qualify for this credit. Now, a more commonly talked about credit is the one around electric vehicles. This credit is $7500. It’s being extended, but there are a lot of hoops to jump through. For example, you need to be under a certain income limit. The price of the car needs to be below a certain point, and the manufacturing and pieces of the car need to be domestic. So there are a lot of boxes to check off, but that credit is available.
Affordable Care Act
The third piece is around healthcare. So the Affordable Care Act has what’s called a premium tax credit. Basically this is meant to help families pay and maintain their health insurance. So that’s going to be extended into 2025. The next biggest piece is that Medicare is actually able to negotiate certain prices for drugs, certain drugs, and that’s set to start in 2026.
The last point is around IRS funding – the IRS is actually getting $80 billion in funding, and part of that is going to go towards just increasing efficiencies and processes, but a large portion of it is going to go towards tax enforcement. If you’re looking for a job that’ll make you popular with the neighbors, they’re actually hiring 87,000 new IRS agents and employees. The good news is there’s a lot of literature out there that says if you’re making 400,000 or less, this shouldn’t increase the likelihood that you’ll be audited. Again, this is a pretty high level overview, so if you have questions, feel free to reach out!