The new Inflation Reduction Act that passed in congress this year has a surprising amount of tax implications for both individuals and small businesses. Many of the provisions are extensions of the tax laws that were already in effect but were expiring, such as the Affordable Care Act health insurance premium credits, which were extended to 2025 and the electric vehicle credit that was extended for 10 years and now has many more qualifications, including incentives for electric fleets for small businesses. Other credits were not only extended, but have many more benefits; for example, the Clean Energy Tax Credit not only extended the Solar Energy tax credit for 10 years, but now includes water heaters, heat pumps, HVAC systems and more.  

Small businesses will see their meals deduction reduced from 100 percent back down to 50 percent, which is where it was prior to 2021. Also, the 100 percent bonus depreciation deduction will be reduced this year to 80 percent and go down 20 percent every year until it is phased out.  The Section 179 depreciation deduction is still an alternative for small businesses.

Another portion of the Inflation Reduction Act is $80 billion of additional funding over 10 years for the IRS. Its budget has been woefully neglected over the years and in turn, taxpayers have been left with few ways to communicate with the service to resolve issues, follow up on refunds or even create installment plans. As customer service representatives and agents retire, there has been no budget to hire replacements and without staff, there is not enough people to answer phones or review mail. Additionally, the computer systems at the IRS are antiquated and not integrated, so we can call one department and they can’t see all of the information they need to solve a problem, so we may have to call multiple departments to resolve one issue. So, this additional funding is actually a good thing for taxpayers and tax practitioners. It will allow us all to resolve problems more quickly and efficiently. 

The best way to save on taxes is to plan ahead and get a good tax advisor. Tax laws change every year and what we don’t know can and will cost us money. With the uncertainties of the economy and inflation, even if a tax professional hasn’t been used before, now is the time. He or she can provide guidance to make the right decisions in the face of these many unknowns. 

A Certified Public Accountant is available to provide advice and help throughout the year. For those that have financial decisions to make during the year, this advice could be invaluable. So, most people would benefit greatly from the services of a CPA.