On August 12, 2022, the House passed the Inflation Reduction Act of 2022, and President Biden signed the bill on August 16, 2022. The expectation is a reduction of the deficit by $300 billion with various revenue raisers and spending on climate, clean energy and healthcare.
The following are major tax provisions that may impact your business and you:
Individual Income Taxes
- Extends the limitation on pass-through business losses, enacted in the 2017 Tax Cuts and Jobs Act, for 2 years through 2028.
- Extends the expanded health insurance Premium Tax Credits boosting the subsidy for lower-income households, through the end of 2025.
- For households, the incentives help make things like rooftop solar panels, electric vehicles, and energy-efficient appliances more affordable. Some of the tax breaks are new, while others are enhancements or extensions of existing credits. Up to $7,500 tax credit for new electric vehicles and for used electric vehicles $4,000 or 30% of the sales price, whichever is less. 30% tax credit for solar panels, wind, geothermal energy, and biomass fuel beginning in 2022 to the end of 2032. 30% tax credit toward the cost of installing efficient exterior windows, skylights, exterior doors, water heaters and other similar items. There are various limitations, so please contact us for more information.
Corporation Income Taxes
- Imposes a 15 percent minimum tax on corporation book income for corporations with profits over 1 billion, effective for tax years beginning after December 31, 2022.
- Creates a 1 percent excise tax on the value of stock repurchases during the year effective after December 31, 2022.
- Increases the research & development tax credit amount that can be claimed against payroll taxes for small businesses from $250,000 to $500,000.
Expansion of the IRS
- Invests $80 billion in the IRS over 10 years. Hire 87,000 new IRS agents.
- Strengthen tax collection and enforcement on corporations and high-income earners with the goal of collecting $124 billion.
The Tax Foundation analyzed the bill and concluded the bill will reduce long-run economic output by about 0.2%. By reducing long-run economic growth, the bill may actually worsen inflation by constraining the productive capacity of the economy.
If you have any questions or would like additional information, please contact us here or call us at (866) 760-0940.