As you probably heard on the news, President Biden signed the Inflation Reduction Act of 2022 on August 16. Among other things, the legislation includes various initiatives such as locking in the American Rescue Plan health coverage rates through 2025, increasing taxes for large corporations, incentives for clean energy use, and significant investments in health care and prescription drugs in an attempt to make them more affordable.
Inflation Reduction? That Remains to Be Seen.
The bill’s name would imply it seeks to tame runaway inflation. Unfortunately, the Congressional Budget Office (CBO) and the Penn Wharton Budget Model (a nonpartisan research organization) anticipate that the bill won’t significantly reduce inflation. However, the CBO went on to say that the bill will likely decrease the deficit by more than $100 billion over the coming decade.
Impact on Healthcare and Drug Costs.
For consumers, the bill could result in savings on prescription drugs for select retirees. Starting in 2025, Medicare recipients will have a $2,000 annual cap on out-of-pocket prescription drug costs (a decrease from the $7,050 out-of-pocket prescription max under today’s Medicare plan).
Another impact for approximately 3 million Americans is the Affordable Care Act subsidy extension. These subsidies (currently paid by the federal government to lower premiums) were scheduled to expire at the end of this year; they will now be extended through 2025.
The Inflation Reduction Act includes significant legislation related to energy security and climate change. If you’re considering any energy-related home improvements, the bill includes a 30% tax credit for using energy-efficient windows and heat pumps, and rebates for upgrading to energy-efficient appliances. Solar panel installation will provide additional tax credits.
For those owning an electric vehicle, there are new and expanded tax credits for electric vehicle owners. There’s also a tax credit for installing an electric charger in your home (although there are restrictions, so be sure to read the fine print).
As always, we’re here if you have questions or need guidance on your unique situation. Just give us a call.