Here are some highlights from the Inflation Reduction Act that was signed into law on August 16th:
The cost of Marketplace health insurance remains capped for everyone. You only have to pay at most 8.5% of your income or the total cost of the premiums, whichever is lower. This was extended through 2025.
The 2021 Energy-efficient Home Improvement Credit was extended through 2022. The lifetime limit is $500.
The Energy-efficient Home Improvement Credit was expanded for 2023 and going forward. The credit resets annually (as opposed to a lifetime limit) and has a $1200 limit.
Solar, geothermal, wind, biomass fuel, and fuel cell tax credits will go back up to 30% until 2032. The percentage had been slowly decreasing.
The Qualified Plug-in Electric Drive Motor Vehicle Credit is now the Clean Vehicle Credit. If you signed a contract/purchased a vehicle before August 16, 2022, the old rules apply. If you sign into a contract for a car after this date, there are more restrictions on who/what qualifies:
The vehicle needs to have final assembly in North America starting August 16, 2022. The manufacturer will have this info.
Starting in 2023, there are limits on where the battery components can come from and still qualify. Starting in 2024, critical minerals of the battery have limits on where they can come from as well. The car manufacturer will have to provide this information to the buyer.
There are income limits to who can claim the credit. Your adjusted gross income (AGI) must be below $300,000 for married people, $225,000 for head of household filers, and $150,000 for single tax payers. This starts in 2023.
Car makers that were previously phased out of the credit due to number of sales will have their vehicles eligible for the credit again if they meet the requirements listed in the first two bullet points.
Used electric vehicles can potentially qualify for a smaller version of credit.
Starting July 1, 2022, the IRS has updated the mileage rate for the rest of 2022 to be $0.625 per mile. Please separate out any mileage logs to show Jan-Jun and Jul-Dec mileage. Here is more information from the IRS.
If you like using our datasheet, you can go to our Prepare My Taxes page to enter in your information and send it to us electronically or else you can print that page out to get the familiar datasheet and write it in yourself.
The IRS will be sending out Letter 6419 in January of 2022 to let taxpayers know how much advance payments they received for the child tax credit. Please keep this letter with your tax records and bring it in during tax time so we can report this on the tax return. If you do not have this letter, the amount reported on the tax return may not be correct, which can result in: delayed processing of the return, lower refunds received, or more to pay in to the IRS.
The limits for 401(k), 403(b), and most 457 plans will increase to $20,500 for 2022. The catch up limit for people aged 50 and over is at $6500; the total contribution can be up to $27,000. Here is the IRS release with more details: IRS announces 401(k) limit increases to $20,500
The limits for a Simple IRA contribution will increase to $14,000 for 2022. The catch up limit for people aged 50 and over is $3000; the total contribution that can be made is up $17,000. Here is the updated IRS page with more details: Retirement Topics – SIMPLE IRA Contribution Limits