Tax Law and News What you need to know about the Inflation Reduction Act of 2022 Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Lisa Greene-Lewis Modified Nov 2, 2022 4 min read In August 2022, President Biden signed the Inflation Reduction Act of 2022, which includes new tax provisions, extensions, and expansions of tax benefits related to energy efficiency and healthcare. Here are some important things you and your clients need to know about provisions within the law: Energy efficient tax benefits A portion of the tax bill will go to consumer home energy rebate programs, including the Clean Vehicle Credit, the Alternative Fuel Vehicle Credit, and energy credits for the taxpayer’s home. Clean Vehicle Credit Before the Inflation Reduction Act, people were able to claim a credit of up to $7,500 for the purchase of a new electric vehicle. Under the new law, people still may be eligible for the renamed Clean Vehicle Credit, and up to a $7,500 tax credit for purchasing a new electric vehicle—and for the first time. Depending on their income, people may be eligible for a tax credit up to the lesser of $4,000 or 30% of the sales price for buying a used electric vehicle. Since credits are a dollar for dollar reduction of taxes owed, they can lower your taxes by up to $7,500 and save money on gas. Some of the changes related to the Clean Vehicle Credit include: The manufacturer limitation is eliminated for cars sold after Dec. 31, 2022. Requires final assembly in North America. Manufacturer must be a qualified manufacturer. Manufacturer’s suggested retail price for vans, sport utility vehicles, and pick ups is limited to $80,000 and other cars are limited to $50,000. For new cars, modified adjusted gross income cannot exceed $300,000 married filing jointly, $225,000 Head of Household, $150,000 single. For used cars, modified adjusted gross income cannot exceed $150,000 married filing jointly, $112,500 head of household, $75,000 single. The Clean Vehicle Credit will apply to electric vehicles purchased by Dec. 31, 2032. People who purchased an electric vehicle before the Inflation Reduction Act passed can follow the previous rules in place. For business owners, the Inflation Reduction Act also adds a tax credit of up to $7,500 for new commercial clean vehicles placed in service after December 31, 2022. Credit for electric chargers installed at your home or business Prior to the Inflation Reduction Act, a tax credit was available for electric charging stations put in place by businesses and main homes prior to Jan. 1, 2022. The new law extends the credit for charging stations put in service before Jan. 1, 2033. Energy Credits available for your home Before the Inflation Reduction Act, people were allowed a credit up to 10% of the amount paid for nonbusiness energy property, such as windows, doors, and skylights, and the amount of residential energy property placed in service before Jan. 1, 2022. Now, taxpayers may take the credit at an increased amount up to 30% if they placed the property in service before January 1, 2033. The provision also eliminates the lifetime credit limit that was previously in place and limits the credit per taxpayer per year. Credits for solar energy Before the Inflation Reduction Act, if you purchased residential energy efficient property such as solar panels and solar water heaters for your home, the tax credit was 26% of your purchase. Under the new law, the credit increased to 30% if you purchase the energy efficient equipment Jan. 1, 2022 through Dec. 31, 2032. Healthcare tax benefits The tax law extends healthcare subsidies if health insurance is purchased in the Health Insurance Marketplace, further extending benefits that were expanded for 2021 and 2022 under the American Rescue Plan. Healthcare subsidies can help lower the health insurance premiums you pay and can also show up as a premium tax credit when you file your taxes if you don’t receive enough subsidy based on your income when you purchase health insurance in the Health Insurance Marketplace. The Premium Tax Credit is generally available to people with households between 100% and 400% of the Federal Poverty Level, but under the American Rescue Plan, individuals with income above 400% of the Federal Poverty Level were eligible for the Premium Tax Credit for tax year 2021 and 2022 only. Under the Inflation Reduction Act, these benefits will continue. The law also caps Medicare beneficiaries out-of-pocket expenses for prescription drugs at $2,000 per year and will allow Medicare to negotiate some of the more expensive drugs on the market. Corporate tax changes Corporations making $1 billion or more will see 15% minimum tax and a tax of 1% of the fair market value on repurchased stock. As always, stay tuned to the Intuit® Tax Pro Center for the lates tax and legislative updates. Editor’s note: This article was originally published on Aug. 11, 2022, and updated with new content on Aug. 17, 2022. Previous Post September 2022 tax and compliance deadlines Next Post Knowing how the IRS contacts taxpayers can help keep your… Written by Lisa Greene-Lewis Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis Comments are closed. 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