Health Care Inflation Reduction Act of 2022: What it Means for You and Your Taxes Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by TurboTaxLisa Published Aug 9, 2022 - [Updated Jun 26, 2023] 4 min read Let’s take taxesoff your mind We’re ready to help you getyour taxes done right, Get started Today the President signed the Inflation Reduction Act of 2022 into law, which includes new tax provisions, extensions, and expansions of tax benefits related to energy efficiency and healthcare. Here’s what’s included in the Inflation Reduction Act and what it can mean for you and your taxes. Energy Efficient Tax Benefits A portion of the tax bill will go to consumer home energy rebate programs and include the Clean Vehicle Credit, the Alternative Fuel Vehicle Credit, and energy credits for your 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 a tax credit up to $7,500 for purchasing a new electric vehicle under the renamed Clean Vehicle Credit, and for the first time, starting January 1, 2023 people purchasing used electric vehicles may be eligible for a tax credit up to the lesser of $4,000 or 30% of the sales price, depending on their income. Since credits are a dollar for dollar reduction of taxes you owe, you 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 December 31, 2022 Requires final assembly in North America (Effective immediately on August 17, 2022, unless you have entered into a binding contract to purchase a new electric vehicle before August 16, 2022) 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 Most of the changes are effective with electric vehicles purchased starting January 1, 2023. The only change in the law that is effective immediately starting on August 17, 2022 is that new electric vehicles must receive final assembly in North America. People who entered a binding contract to purchase a new 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 January 1, 2022. The new law extends the credit for charging stations put in service before January 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 like windows, doors, and skylights and the amount of residential energy property placed in service before January 1, 2022. The Inflation Reduction Act extended the allowed credit up to 10% through December 31, 2022 and increased the Energy Efficient Home Improvement Credit amount up to 30% for qualifying property placed in service on or after January 1, 2023 and 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 beginning in tax year 2023 (the taxes you file in 2024). Credits for Solar Energy Before the Inflation Reduction Act, if you purchased residential energy efficient property like 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 January 1, 2022 through December 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 dollars or more will see 15% minimum tax and a tax of 1% of the fair market value on repurchased stock. Please check back with the TurboTax Blog to find out more information about the Inflation Reduction Act and the most up to date information on the details of what’s included in the bill and what it means to you. You don’t need to worry about knowing tax law changes. TurboTax will be up to date and you can hand your taxes over to our TurboTax Live tax experts who can fully do your taxes from start to finish. If you have questions, you can ask them in our Tax Law Changes Forum, where our tax experts will be on hand to help. Let’s take taxesoff your mind We’re ready to help you getyour taxes done right, Get started Previous Post Donate Your Wedding Dress for a Tax Deduction Next Post “Unidos We Grow” with George Lopez and Soledad O’Brien 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 Follow Lisa Greene-Lewis on Twitter. 15 responses to “Inflation Reduction Act of 2022” Thank you so much for the information. You broke the info down so it was understandable! Reply Thank you Lisa. As a tax professional I find this information most useful to assist my clients. Reply Thank you Jewel! I am happy we can be a resource. Best, Lisa Reply thank you, we need your expertise there’s no way I as a senior person can keep up with the changing tax laws. Reply Thank you Vera. We are happy to be a resource for you. Also remember that you don’t need to know all of this information. You can fully hand over your taxes to our TurboTax Live tax experts. Best, Lisa Reply Does the Clean Vehicle Credit include electric golf carts that are street legal? Reply Hi Pete, I haven’t seen any details regarding the new credit including electric golf carts, only vehicles, but check back as we continue to provide up to date information as more guidance comes out. Best, Lisa Reply Did the act eliminate the cap on local & state taxes on schedule A? Reply Hi Jim, I have not seen any provision in the Inflation Reduction Act that eliminates the $10,000 cap on state and local sales and property taxes. Check back with the blog as we provide more details as more guidance is issued. Best, Lisa Reply Thanks, excellent job. I did see you on Steve Harveys’ Show and major news broadcast. Reply Thank you Norma. Best, Lisa Reply Will TurboTax ask me relevant new tax regulation options during the online filing process that I submit every year? Such as: Have you purchased a new or used electric vehicle in 2022? Reply Hi Nancy, Yes TurboTax will ask you the relevant questions and walk you through claiming the new credits and other deductions and credits. You can also fully hand your taxes over to a TurboTax Live tax expert who can do your taxes from start to finish so you don’t need to worry about your taxes. Best, Lisa Reply Just to confirm, is $300,000 income limit applicable immediately or starting from 01/01/2023? Reply Hi Gaurav, The income limitations and most of the other changes are in effect beginning with purchases starting 1/1/23. The only change effective immediately on 8/17/22 is that any new electric vehicle you purchase needs to receive final assembly in North America. Best, Lisa Reply Leave a ReplyCancel reply Browse Related Articles Life Clean Vehicle Tax Credit: Find Out If You Qualify Home Energy Efficient Improvements to Save Money at Tax-Time Tax Planning Tax Law Changes and Your Guide to Filing Taxes in 2024 Tax Planning Your Guide to Filing Taxes in 2023 Tax Planning 6 Tips to Help You Plan for Next Tax Season Now Home Earth Day 2023: Going Green Saves You Green on Your Tax… Tax News TurboTax Tax Trends Report: Tax Year 2022 Lookback Tax Reform Tax Reform Bill Passed: Here’s What It Means for You Taxes 101 What Are Tax Brackets? Tax Reform How Does the New Tax Law Affect My Health Insurance?