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IRS Changes Are on Their Way- For the Coming 5 Years

President Biden authorized the Inflation Reduction Act on 16 August. One of the largest expenditure plans in American history, at $750 billion. A large portion of the money will go toward implementing tax reform, lowering healthcare, and prescription drug costs, and fighting climate change. When though? And how do the taxpayers benefit from all of this?

The Inflation Reduction Act that is going to implement over the coming five years comes with some key changes, here’s a look. And what they could mean for your wallet, as broken down by CPAs and other financial professionals.

Prescription Drug Costs- IRS

According to Brian Mawhinney, CFP, head of financial planning at MassMutual, “retirees are faced with balancing rising prices while depending on fixed wages,” as a result of the current increase in inflation. The Inflation Reduction Act makes an effort to combat rising healthcare costs by addressing rising prescription drug costs to help avoid seniors from forgoing necessary services like healthcare.

“The law permits Medicare to bargain directly with drug manufacturers. For instance, roughly 25% of Medicare beneficiaries are dependent on the life-saving medication insulin. These expenses will now be capped at $35 per month as a result of the IRA. A $2,000 annual cap on out-of-pocket payments for prescription medications will also provide Medicare beneficiaries with additional financial protection, saving many elders up to $1,000 each year.

Credit for Home Improvements That Save Energy

According to Levon L. Galstyan, CPA of Oak View Law Group, “The Nonbusiness Energy Property Credit has retitled the Energy-Efficient Home Improvement Credit and expanded through 2032.” Beginning in 2023, the credit will be equal to 30% of the costs of all permitted home modifications made during the year.

Clean Residential Energy- Credit

Originally scheduled to expire at the end of 2023, the Residential Clean Energy Credit has now been expanded to 2034, according to Galstyan. The credit amount was increased by the Inflation Reduction Act, and the corresponding percentage was taken out.