The Inflation Reduction Act was passed earlier this month. Will it help curb inflation or not? The verdict is still out. According to an analysis by the University of Pennsylvania’s Penn Wharton Budget Model, the answer is not anytime soon. While we don’t know the long-term effects of the act, we can still benefit in the near term. The Inflation Reduction Act will benefit individuals and families by providing tax credits for electric vehicles, issuing rebates for specific household updates, lowering Medicare costs, and providing additional funding to the IRS.
Is now the time to buy your electric vehicle?
The signed bill provides a tax credit of up to $7,500 if you buy a new electric vehicle next year. It also provides up to a $4,000 tax credit for those that buy a used electric vehicle. Sounds enticing, right? Just as with any tax credit, there are caveats to consider.
If you are in the market for a new electric vehicle and qualify for the tax credit under these terms, then you may want to consider purchasing the vehicle in 2023 to benefit from the tax credit!
Rebates for household updates.
The bill includes providing as much as $14,000 in rebates to households for clean energy updates.
The rebates (per household) include:
These green updates would save families a minimum of $350 per household according to the White House. Interested in how this impacts your household? Check out this state-by-state map for the potential saving of energy and money.
The bill will also provide tax credits that will likely cut the cost of installing rooftop solar by 30%.
Updates to Medicare.
There are several updates to Medicare per the White House:
The IRS may take your call.
The Inflation Reduction Act will provide $80 billion in additional funding to the IRS. This funding will be used to provide better service. As many of you have experienced, the IRS has been extremely delayed for call times. The funding will also be used to issue faster refunds (we had a handful of clients receive their 2021 tax refund late this summer). The funding will also be used for more audits to help provide additional revenue to the government.
The bill will also instill a 15% corporate minimum tax and a 1% fee on companies that issue stock buybacks.
According to the Joint Committee on Taxation, the Congressional Budget Office, and the Senate, the total deficit reduction will be +$300 billion from the signing of this bill.
The total revenue raised is estimated to be $737 billion. Revenue generated will come from 15% corporate minimum tax, prescription drug pricing reform, IRS enforcement, 1% stock buyback fee, and loss limitation extensions.
The total expenses of the bill are estimated to be $437 billion. Investments into the projects include energy security, climate change, Affordable Care Act extension, and western drought resiliency.
In summary, the bill's main purpose is to:
The Inflation Reduction Act provides us with the opportunity to take advantage of tax credits and rebates at a time when many of us our making adjustments to our lifestyles. If you are in the market for housing updates or an electric vehicle, now might be your opportunity to move forward.
If you want a second opinion on your situation, schedule a free consultation with us today.
Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.