The Inflation Reduction Act was signed into law on Tuesday, August 16. While the $430 billion package includes many provisions, this article highlights three key areas:
- Tax credits for energy-related home improvements - The bill includes a 30% tax credit for installing energy-efficient windows, heat pumps, or newer appliances. There’s another tax credit for installing solar panels, and up to $14,000 worth of rebates for upgrading to new, energy-efficient appliances.
- Expanded EV tax credits - New tax credits are immediately available, with up to $4,000 offered for used EVs and up to $7,500 for new EVs. There’s also a tax credit for installing an electric charger in your home (just read the fine print to ensure you qualify).
- Prescription drug caps - Some changes don’t take effect right away. For example, insulin payments will be limited to $35 per month for Medicare Part D beneficiaries starting next year. In 2024, overall out-of-pocket drug costs will be limited to $4,000 annually, dropping to $2,000 in 2025.
What is not in the bill?
Among the most notable items previously discussed in the Build Back Better Act that are missing from the Inflation Reduction Act of 2022 are the following:
No changes to the estate and gift tax rules.
No increases to the tax rates on high earners.
No change to the tax rates applicable to individuals on long-term capital gains.
No increase to the corporate income tax rate, which remains at a flat 21%.
No change to the qualified small business stock exclusion.
No change to the like-kind exchange rules.
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This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.
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