Below are the major tax provisions contained within the Inflation Reduction Act signed into law on August 16th, 2022.
Corporate Tax Provisions (effective after 12/31/22):
Imposes a 15% minimum tax on corporate book income for corporations with profits over $1 billion
About 150 companies expected to be impacted
Creates a 1% excise tax on the value of stock repurchases during the taxable year, net of new issuances of stock for "covered" corporations whose stock traded on an established security market. Excluded from the tax are stock contributed to retirement accounts, pensions, and ESOPs
Individual Tax Provisions (effective after 12/31/22):
Extends the limitation on pass-through business losses for two years through 2028
Premium Tax Credit (PTC) extended and expanded through the end of 2025
Energy Tax Credits and Deductions (effective after 12/31/22):
Nonbusiness energy property credit
Credit increased from 10% to 30% of the amount paid by taxpayer for qualified energy efficiency improvements (doors, windows, skylights, insulation, heat pumps, water heaters, furnaces, water boilers, etc.)
Repeals $500-lifetime limit and now has a $1,200 annual limitation instead
Residential energy efficient property credit
Increases credit for qualified expenditures made by a taxpayer for residential energy efficient property (solar electric, solar water heating, fuel cell, small wind energy, geothermal heat pump, biomass fuel, and battery storage technology)
New qualified plug-in electric drive motor vehicles credit
Credit amount - $3,750 for meeting the critical minerals requirement and $3,750 for meeting the battery component requirement. AGI limitations apply
Repeals manufacturer limitations so additional vehicles qualify (examples: Tesla and GM)
Possible credit amount for previously owned "clean" vehicles. Lesser of $4,000 or the amount equal to 30% of the sale price with respect to such vehicle. AGI limitations apply
IRS Funding
$80 billion in total, with $45 billion for enforcement and $25 billion for operations support.
The Inflation Reduction Act of 2022 has created many new tax provisions that could affect you as a taxpayer. Please contact us if you have any questions!