Going Green and Staying Healthy: The Inflation Reduction Act Brings New Tax Benefits

The President has 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.

The tax bill supports home energy rebates and tax credits for clean vehicles and home energy efficiency. The Clean Vehicle Credit allows for a credit of up to $7,500 for new electric vehicles, with a potential credit of $4,000 or 30% of the sales price for used electric vehicles based on income starting in 2023, as reported by Turbo Tax on July 20, 2022.

The electric vehicle manufacturer limitation has been lifted for cars sold after 2022. New electric vehicles must be assembled in North America. The Inflation Reduction Act offers a tax credit of up to $7,500 for new commercial clean vehicles used after December 31, 2022.

For charging stations installed at homes or businesses, the credit has been extended until January 1, 2033. Additionally, the tax credit for nonbusiness energy property like windows, doors, and skylights increased from 10% to 30% if placed in service before January 1, 2033. The lifetime credit limit has also been removed. The tax credit for solar energy property has been increased from 26% to 30% if purchased between January 1, 2022, and December 31, 2032.

Based on a report by the Kaiser Family Foundation on January 24, 2023, the Inflation Reduction Act extends healthcare subsidies and caps Medicare beneficiaries’ out-of-pocket drug expenses at $2,000 per year, with Medicare negotiating expensive drugs.

For corporations making over 1 billion dollars, the act includes a 15% minimum tax and a 1% tax on the fair market value of repurchased stock.

WASHINGTON, DC – AUGUST 16: U.S. President Joe Biden (C) gives Sen. Joe Manchin (D-WV) (L) the pen he used to sign The Inflation Reduction Act with Senate Majority Leader Charles Schumer (D-NY) and House Majority Whip James Clyburn (D-SC) in the State Dining Room of the White House August 16, 2022 in Washington, DC. The $737 billion bill focuses on climate change, lower health care costs and creating clean energy jobs by enacting a 15% corporate minimum tax, a 1-percent fee on stock buybacks and enhancing IRS enforcement. (Photo by Drew Angerer/Getty Images)