Inflation Reduction Act – What it Means for Individual Taxpayers

The Inflation Reduction Act included a number of items for businesses, but what about individual taxpayers?

Overall, the Inflation Reduction Act included a number of credit updates and other extensions that affect individuals:

Credit extensions

  • Energy Efficient Home Improvement Credit (previously known as the Nonbusiness Energy Property Credit) is now extended through 2032. In 2022, the credit is equal to 30% of the cost of all eligible home improvements made during the year, up to $1,200 annually. The annual limits for qualifying improvements are:
    • Home energy audits: $150
    • Any exterior door that meet applicable Energy Star requirements: $250 ($500 total for all exterior doors)
    • Exterior windows and skylights that meet Energy Star most efficient certification requirements: $600
    • Other qualified energy property, including central air conditioners; electric panels and certain related equipment; natural gas, propane, or oil water heaters; oil furnaces; water boilers: $600
    • Heat pump and heat pump water heaters; biomass stoves and boilers: $2,000
      • This category is not under the $1,200 annual limit on total credits or the $600 limit on qualified energy property
    • Roofing no longer qualifies

 

  • Residential Clean Energy Credit (previously known as the Energy Efficient Property Credit) is extended through 2034 and increased the credit, with applicable phase outs:
    • 30 percent for 2023-2032
    • 26 percent for 2033
    • 22 percent for 2034

 

  • Clean Vehicle Credit is now extended through 2032 and includes new credits for previously-owned clean vehicles and qualified commercial clean vehicles. Individual taxpayers are eligible for credits up to:
    • $7,500 for the purchase of new qualified commercial clean vehicles
    • $40,000 for vehicles over 14,000 pounds
    • The lesser of 30 percent of the price of used electric vehicles or $4,000

 

Important Tax Extensions and Updates

  • Affordable Care Act funding now runs through 2025
  • American Rescue Plan Act temporary extension allowing taxpayers with incomes above 400% of the Federal Poverty Level to qualify for the Premium Tax Credit. The Premium Tax Credit is a refundable credit that helps eligible individuals and families cover the premiums for health insurance purchased through the Health Insurance Marketplace.
  • Prescription drug provisions that include:
    • $2,000 out-of-pocket spending cap for Medicare Part D participants starting in 2025
    • $35 monthly insulin cost sharing limit for Medicare participants starting in 2023

Corrigan Krause Can Help

The tax pros at Corrigan Krause can help individual taxpayers navigate the Inflation Reduction Act and take advantage of any credits or deductions they may be eligible for. Email info@corrigankrause.com for more information on becoming a Corrigan Krause client.

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