Inflation Reduction Act: Common Tax Questions

September 6, 2022

Last month, President Biden signed the Inflation Reduction Act into law. The bill had a lot in it, including some changes to taxes and tax credits. News headlines can be deceiving or misleading when making generic claims about complicated legislation. Here are some common questions about how – or if – changes will affect you.

The law mentions a 15% Corporate tax – will that affect my business?

The Inflation Reduction Act implements a minimum 15% tax on corporations that earn $1 Billion or more in annual profit. If your corporation earns less than $1 Billion per year, your corporation will not be subject to the 15% minimum tax.

The IRS is getting more money – will I be audited?

Quite unlikely. The Biden Administration has indicated that there will not be an increase in audits on taxpayers making less than $400,000. While this is not officially written into the law, it is simply more profitable for the IRS to audit the superwealthy - increased funding for the IRS recoups $5 in tax receipts for every $1 spent. Regardless of your income, the best policy is simply to always pay your taxes fully and on time while being honest about your tax deductions.

What tax credits or tax incentives can I take advantage of?

Many tax credits were included in the Inflation Reduction Act as part of efforts to combat climate change. If you purchase a new electric vehicle, you can get up to $7,500 in tax credits; up to $4,000 in tax credits are available for purchases of used electric vehicles. Additionally, those who install solar panels can get a credit for 30% of the cost of the system.

Tax credits for purchasing health insurance on online healthcare marketplaces such as healthcare.gov or state-run equivalents have been extended for an additional three years.

Looking for legal advice for your personal income taxes or your business’s corporate taxes? Give Strzalka Law Office a call at 773-631-9215 or email us at StrzalkaLaw@maslawoffice.com.