Here’s Cary’s quick summary of key takeaways from the Inflation Reduction Act signed by the president last week, with emphasis on how it may affect you and your family.
Recently, the US Congress, House and Senate and Joe Biden signed off on legislation called the Inflation Reduction Act of 2022. The act has a bunch of provisions that were originally intended to be in the Build Back Better legislation that Biden originally proposed.
Let’s walk through some of those things so that you can understand exactly what is in this bill and how it will affect you and your family. There are a lot of things that won’t have much impact on you because they’ll be totally behind the scenes. First, on the tax front, as individuals, very little effect. But on large companies that show over $1,000,000,000 in profits that weren’t paying any taxes, they’re going to have a minimum tax. They will have to pay taxes under this new legislation.
Also, companies that are buying back their stock will pay a 1% excise tax on stock buybacks. That’s really an incentive for companies to distribute the money out in the form of dividends which is taxable to the government, or pay some tax if you’re buying it back.
Additionally, the IRS is going to get a bunch more funding. They’re going to get $80 billion so that they can increase the enforcement of people and organizations that are not paying their fair share of taxes.
The bill also has provisions that concern health care for all Americans, primarily Americans that are on Medicare. And one of the things that it does is that it allows Medicare to negotiate with pharmaceutical companies for the price of drugs that people are paying that are on Medicare. Now, the negotiation is going to be between Medicare and the pharmaceutical companies, and Medicare is going to provide the drugs to the Medicare recipients. The government should be able to save some money on Medicare expenses if that’s successful.
Additionally, for people on Medicare that have multiple drugs that they’re taking, your out-of-pocket expenses will eventually be capped to only $2,000 a year. So we have clients that pay five or six or $7,000 a year for drugs that they have to take on Medicare. That expense in 2025, not tomorrow, but in 2025, goes down to $2,000 a year.
And if you’re on insulin, the price that you pay if you’re a Medicare recipient for insulin, is going to be limited to $35 a month. For a lot of people, that’s going to save them a substantial amount of money.
Now, the last thing that the Inflation Reduction Act addresses that was part of the major piece of legislation is climate change. And on the climate change fronts, in addition to giving construction companies incentives to build environmentally friendly buildings, it’s also going to give consumers tax credits to buy electric vehicles, to purchase energy-efficient appliances, and to install solar panels on your home. So if you’ve been thinking about doing some of those things, you’re now going to have the government subsidize those purchases up to 30% of what you’re buying that’s on an energy-efficient basis. There are a number of other climate pieces in here that are designed to reduce emissions in the United States.
These are the primary and salient points of what the Inflation Reduction Act of 2022 does and how it’s going to impact your family. I’m Cary Stamp with Cary Stamp and Company and this has been a Principled Wealth Moment.