On August 16th, President Biden signed into law the Inflation Reduction Act of 2022 after the bill was passed by both the Senate and the House of Representatives. This sweeping bill includes federal tax policy changes and large investments in a wide-ranging number of industries aimed at tackling climate change and lowering health care costs, among many other intended impacts.
This bill includes a number of items that could impact your federal taxes. Here are some of the major tax provisions highlighted in the Act:
- Households earning less than $100,000 annually will see net tax cuts through 2025, resulting from subsidies extended for Affordable Care Act health insurance premiums.
- Individuals and households will have access to certain tax incentives, credits, and benefits for new and used electric automobiles and new home-energy efficiencies.
- A new corporate minimum tax will require companies with $1 billion or more in financial net profits to pay a minimum 15% tax. That tax is expected to generate approximately $222.2 billion over the next 10 years.
- Taxpayers earning $500,000 or more annually will see their income tax increase by approximately 1% in 2023. That increase is indirectly tied to the corporate-tax hike.
- A new 1% federal excise tax will be incurred by corporations buying back their own stock from stockholders. That excise tax is expected to generate approximately $73.7 billion over the next 10 years.
- Under prior law, a noncorporate taxpayer’s excess business losses were restricted for tax years beginning after December 31, 2020, and before January 1, 2027. Under the Act, Congress extended those restrictions for tax years beginning after December 31, 2026, and ending before December 31, 2029.
The “Inflation Reduction Act of 2022” may create opportunities or have a financial impact on you, your household, or your business. For questions about how this legislation may affect your federal taxes, please reach out to our tax attorneys at Wood + Lamping.