President Biden signed the Inflation Reduction Act of 2022 (IRA) as Public Law 1217-169 on August 16, 2022.
To combat inflation, the Inflation Reduction Act will make a historically large down payment on deficit reduction, make investments in local industry and energy production, and cut carbon emissions by nearly 40% by 2030. The enlarged Affordable Care Act program will be continued for an additional three years, through 2025, under the act, which also permits Medicare to bargain over the cost of prescription drugs. In addition to lowering the current inflation rate, the Inflation Reduction Act is projected to cut the deficit by $300 billion.
The Inflation Reduction Act accomplishes the following:1. Expands Medicare benefits: free vaccines (2023), $35/month insulin (2023) and caps out-of-pocket drug costs to an estimated $4,000 or less in 2024 and settling at $2,000 in 2025
2. Lowers energy bills: cuts energy bills by $500 to $1,000 per year
3. Makes historic climate investment: reduces carbon emissions by roughly 40% by 2030
4. Lowers health care costs: saves the average enrollee $800/year in the ACA marketplace, allows Medicare to negotiate 100 drugs over the next decade, and requires drug companies to rebate back price increases higher than inflation
5. Creates manufacturing jobs: more than $60 billion invested will create millions of new domestic clean manufacturing jobs
6. Invests in disadvantaged communities: cleaning up pollution and taking steps to reducing environmental injustice with $60 billion for environmental justice
7. Closes tax loopholes used by wealthy: a 15% corporate minimum tax, a 1% fee on stock buybacks and enhanced IRS enforcement
8. Protects families and small business making $400,000 or less
Research Credit for Small Businesses
The IRA raises the amount of the research credit that some small businesses may claim against their payroll tax to $500,000 (previously $250,000) for tax years starting after December 31, 2022 [IRA section 13902, modifying IRC section 41(h)(4)(B)(i)].
Refundable Credit for Coverage under a Qualified Health Plan
The refundable credit under IRC section 36B for coverage under a qualified health plan has been extended until tax years starting before January 1, 2026 [IRA section 12001(a), modifying IRC section 36B(b)(3)(A)].