Tax Tip: What the Inflation Reduction Act Means for You

The rising inflation is something that is a concern for every American. Therefore, President Joe Biden recently signed the Inflation Reduction Act of 2022 (IRA),

which addresses various issues, such as climate change, healthcare, etc.

As an average American, you would want to know how the IRA impacts you and what it means for your taxes. This article will discuss some of the changes that the IRA will bring in different areas.

Affordable Care Act (ACA) Premium Tax Credits

The IRA significantly impacts the Affordable Care Act (ACA) program, which is now extended till 2025. As a result, the eligible applicants can take advantage of the lower healthcare premiums for their health coverage from the federal Health Insurance Marketplace. 

So, if you rely on health insurance from the federal government then it is something worth considering. The Federal government expanded the ACA premium tax credit program throughout the pandemic. It allowed families to claim the refundable tax credit for 2021-22.

IRS Tax Enforcement

Another vital thing to consider in the IRA is the additional funding of $80 billion in the next ten years. The primary objective is to enhance overall tax compliance, which can help in bring around $200 billion in revenue.

While there is still no plan regarding how the IRS will use the money, most people believe that around half of the funds will improve tax enforcement. The other half will go towards:

·       Boosting staffing levels

·       Modernizing outdated processing systems

·       Improving the overall IRS operation

IRA Clean Energy Tax Incentives

The US government is eagerly working toward mitigating the impact of climate change. And the IRA is one step towards achieving those goals. The US Treasury Department seeks to implement various clean energy tax incentives in the IRA. Here are some of the incentives and enhancements in different categories you need to know about:

·       Manufacturing Credits: It concerns the advanced manufacturing production tax credit.

·       Incentives for Homes and Buildings: These incentives include the improvements you make in your home to make it more energy-efficient.

·       Energy Generation Incentives: This includes zero-emission nuclear credit, production tax credit, investment tax credit, clean electricity investment credit, etc.

·       Credit Monetization: It relates to direct pay and transfer of particular credits

·       Credit Enhancements: It enhances the value of various credits and covers apprenticeship, domestic content, etc.

·       Consumer Vehicle Credits: Also referred to as EV tax credits, these are for electric vehicles.

The Bottom Line - Inflation Reduction Act and Average Americans

Taxes are an integral part of a person's finances, and it is vital to know the relevant changes in the time of rising changes. Moreover, it also allows you to plan your finances in the long run since you'll make a pertinent decision regarding buying a home, car, or anything else.

Most importantly, if you rely on health insurance from the federal Marketplace, it is imperative to know how the IRA impacts it. So, if you have any questions or want to know how to manage your finances in the wake of new provisions in the IRA, then you can sign up for our and learn more about it.