It’s difficult to ignore inflation: the prices of everyday goods have soared in recent months and many investors are pausing to question large, discretionary purchases. To support individual taxpayers and bolster the U.S. economy, President Biden signed into law the Inflation Reduction Act of 2022.1 Here are some important highlights from which you could benefit.
Enhanced Premium Tax Credits
First enacted under the American Rescue Plan of 2021, an extension and enhancement of the premium tax credits for the purchase of health insurance in the marketplace is available through 2025. This makes the credit available to more taxpayers, including those with income above 400 percent of the poverty line, and increases the amount of the credits available to those who had already qualified. Visit healthcare.gov for the latest updates.
Electric Vehicle Credits
A federal tax credit for the purchase of electric vehicles (including plug-in hybrids and fuel cell vehicles) is extended through 2032. Modifications include the elimination of the cap system for specific manufacturers and requiring final vehicle assembly in North America. The maximum credit will remain at $7,500 for new vehicles. A new credit of up to $4,000 will be available for the purchase of used vehicles. The credit will now be subject to income limitations, along with maximum vehicle price limitations. Visit fueleconomy.gov for the latest updates on vehicles that qualify.
Residential Clean Energy Credit
The enhancement of the Residential Clean Energy Credit makes a tax credit available equal to 30% of the cost to install qualifying solar, wind, geothermal, biomass, or fuel cell systems to produce electricity, heat water, or control home temperatures through 2032. The credit percentage drops to 26% in 2033 and 22% in 2034. Visit energystar.gov for the latest updates on residential energy credits.
Energy Efficient Home Improvement Credit
Beginning in 2023, a tax credit equal to 30% of the project costs, subject to a $1,200 annual credit limitation, will be available for qualifying energy efficient home improvements, such as insulation, windows, doors, water heaters, heat pumps, central air conditioners, furnaces, hot water boilers, biomass stoves, and electric panels. The enhanced credit will replace the old credit, which remains in effect for 2022, and includes a $500 lifetime credit cap.
If you want to leverage one of the benefits outlined above or desire more information, connect with your CCM advisor to discuss. In addition, don’t forget to mention the Inflation Reduction Act credits you take advantage of when you partner with CCM Tax & Trust Administration to complete your upcoming tax returns.
- Sources for numbers and data cited throughout this summary can be found at: https://www.congress.gov/bill/117th-congress/house-bill/5376/text
NOTE: The information provided in this article is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional adviser familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.
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