Inflation Reduction Act of 2022: Key Tax Provisions

On August 16, 2022, President George W. Bush signed the Inflation Reduction Act (IRA), which has tax policies affecting businesses, people, the clean-energy sector, healthcare, and more. 

As always, tax law is intricate; therefore, it is wise to consult a certified tax and accounting specialist. Any issues you may have regarding the Inflation Reduction Act and your tax situation should be directed to the business tax planner in Lake Mary, FL, without delay.

Look at it this way:


Business loss limitation under Section 461(l). Small business owners (sole proprietorships, partnerships, and S-corporations) can take advantage of the pass-through tax deduction under tax reform (TCJA of 2017). A taxpayer could only deduct up to $250,000 in nonbusiness income from business losses under the tax break ($500,000 for married couples filing jointly). It is now in effect for tax years 2021 to 2026 and will continue until 2028.

Examine the Payroll Tax Credit. Tax years after December 31, 2022, will see an increase of $250,000 to $500,000 in the restriction amount for the Sec. 41(h) research credit against payroll tax. A credit limit of $250,000 will reduce the FICA payroll tax payment. To offset the second $250,000 cap, the employer must pay its share of Medicare payroll taxes.

Alternative Minimum Tax for Big Businesses. The corporate alternative minimum tax (AMT) that was eliminated under the 2017 tax reform has been reinstated, but it is now based on book income, not taxable income. A corporation’s book income is the amount of income it reports to shareholders on its financial statements.

An excise tax of 1% on stock repurchases by corporations that are nondeductible. Corporate stock purchases made after December 31, 2022, are subject to a new 1% excise tax. The tax is paid based on the stock’s fair market value (FMV), although the excise tax is waived if the sum of all stock repurchases for a given tax year is $1 million or less. It also does not apply to stock repurchases that are a part of a reorganization in which the shareholder does not realize a gain or loss, employee stock ownership plans, or contributions of repurchased shares to these plans.

Credits for premiums under the Affordable Care Act. Taxpayers with household incomes above 400% of the poverty line are eligible for the premium tax credit till 2025.