On August 16th 2022, the Inflation Reduction Act was signed into law. This legislation is intended to lower health care and prescription drugs costs for Americans and pave the road to a stronger economy, climate and healthcare system. Curious to learn more about what the Inflation Reduction Act means for you, your family and your finances? Read on for a quick guide to three key targets of this important legislation.
Healthcare Costs
Under the Inflation Reduction Act, it’s expected that Americans will see an overall reduction in healthcare costs. The law allows federal insurance program Medicare to negotiate lower drug prices—the first time in history that such legislation has passed. Medicare patients should see lower premiums and cost-share spending as a result. In addition, the Inflation Reduction act will cap Medicare recipients’ drug costs at $2,000 per year starting in 2025. Insulin costs are now capped as well, at $35 per month. Meanwhile, Affordable Care Act enrollees will get extended subsidies through 2025, which were set to expire in 2022.
Energy Investment
The Inflation Reduction Act contains a number of tax credits for people and businesses that invest in clean energy. Car buyers will be happy to know that the income tax credit for electric vehicle purchases has been extended, offering a tax credit of up to $7,500 for new electric vehicle (EV) purchases and up to $4,000 for used vehicles assembled in North America. Meanwhile, along with supporting energy-efficient commercial buildings, the law also offers a 30% income tax credits to homeowners who introduce clean energy systems—including solar panels, low-carbon heat pumps, and small-scale wind turbines. Home energy audits are also eligible for the credit.
Tax Reforms
Families with an annual household income under $400,000 won’t see any tax increases. Still, the Act does include a number of other tax reforms. Profitable corporations making $1 billion annually will see a minimum corporate tax of 15%, while corporate stock buybacks will now be subject to a 1% surcharge, to encourage businesses to invest widely. The Inflation Reduction Act also allocates new funding for increased IRS enforcement, to find and reduce tax evasion by the ultra-wealthy.
