On August 7, 2022 the Senate passed the Inflation Reduction Act. In this quick video, Vitaly would like to give quick update on the key provisions of the Act that may impact you.
No Changes to IRAs
The biggest relief is that there were no changes to Individual Retirement Accounts. Despite the buzz, the Back Door Roth IRA hadn’t been eliminated and I see this as a big win. Essentially, what that means is that we can continue using this powerful financial planning strategy for future years.
Expansion of Obamacare Subsidies
The other two potential changes that may impact you are related to healthcare and energy credits. Regarding the healthcare side, the Act expanded the Affordable Care Act subsidies for additional three years.
Even better news is for clients whose income exceeds 400% of the federal poverty line income – the credit won’t go to zero once you hit this threshold level as it used to be before the American Rescue Act was signed. Instead the benefit would gradually phase out.
Certain Medicare Drugs Will Cost Less
Another important change on the healthcare side is related to Medicare Part D prescription drugs.
The Act now allows Medicare to directly negotiate for certain prescription drug prices with drug companies. There are just 10 drugs for now but the list will be expanding. There would also be a $2,000 a year cap on out-of-pockets spending for prescriptions drugs. Long story short, the Medicare patients will now be paying less for drugs.
New Credit for Buying Used Electric Vehicles
Regarding energy credits, the Act not only kept a credit of up to $7,500 for EV cars buyers but also eliminated a cap of the first 200,000 eligible vehicles per manufacturer. In addition to that, you can now also get a credit of up to $4,000 for buying a used EV.
More Funding for Tax Enforcements
On a final note, I must mention that the bill provides additional funding of $124 billion dollars for tax enforcements. What that means is that most likely we are going to see more tax audits in the future years. With that being said, make you sure work with a great CPA and if you need a referral, please let me know.