The Inflation Reduction Act, signed into law in 2022 as part of President Biden’s Investing in America Agenda, aims to benefit small businesses and working Americans by investing in deficit reduction to fight inflation, increasing manufacturing, lowering drug prices, and leveling the playing field in terms of taxes. While the law is nearly two years old, there is still debate on how it is truly helping Americans, especially in an election year where politics can intensify these discussions.
One provision of the Inflation Reduction Act involves investing in fairer taxes by providing additional funding for the IRS to target high-earning taxpayers and large corporations making over $400,000 a year who have used tax gimmicks to avoid paying their fair share. This effort has already shown results, with the IRS reporting an additional $360 million in recouped overdue taxes from delinquent millionaires and estimated tax revenues increasing by $561 billion from 2024 to 2034.
Another provision of the Act doubled the refundable research and development tax credit for small businesses from $250,000 to $500,000. This credit can be applied against payroll taxes and various expenses related to product development and technology, potentially leading to greater private sector investment. Research has shown that every $1 of research and development tax credit can result in $4 of long-term research and development spending.
The law also includes consumer tax credits for investments in clean energy, such as tax credits for equipping homes with electric heat pumps, installing rooftop solar, geothermal systems, or battery storage. Families making energy efficiency improvements can also receive tax credits for doors, windows, home energy audits, and insulation. Additionally, lower- and middle-income individuals are eligible for up to $4,000 in tax credits to purchase used electric vehicles, with the Department of Energy estimating that these provisions will reduce electricity rates by up to 9% by 2030.
To take advantage of the tax credits and other opportunities within the Inflation Reduction Act and Investing in America agenda, individuals can visit the Treasury Department’s Inflation Reduction Act Taxpayer Resource Hub to explore what options may be suitable for their circumstances. These incentives are designed to support small businesses, stimulate innovation, promote clean energy initiatives, and ultimately benefit working Americans as part of a comprehensive effort to address inflation and economic challenges.
