The Inflation Reduction Act, signed into law in 2022 as part of President Biden’s Investing in America Agenda, continues to shape economic policy and spark debate, particularly in an election year. While the law encompasses various provisions aimed at tackling inflation and supporting working Americans, its impact on small businesses and main street entrepreneurs remains a focal point of discussion. Here are three key provisions of the Inflation Reduction Act that hold implications for entrepreneurs, particularly in the realm of taxes:
- Investing in Fairer Taxes:
- The Inflation Reduction Act allocates additional funding to the Internal Revenue Service (IRS) to address years of underfunding. This enables the IRS to bolster enforcement efforts, particularly targeting high-earning taxpayers and large corporations engaging in tax avoidance practices.
- Increased IRS enforcement has yielded promising results, with the agency reporting significant recouped taxes from delinquent millionaires. Projections suggest a substantial boost in tax revenues over the coming decade.
- Doubling the Research and Development Tax Credit for Small Businesses:
- One notable provision of the Inflation Reduction Act is the doubling of the refundable research and development tax credit for small businesses, elevating it from $250,000 to $500,000.
- This expanded credit offers small businesses greater financial incentives for innovation and investment in research and development activities, potentially fostering long-term economic growth.
- Consumer Tax Credits for Clean Energy:
- The Inflation Reduction Act includes provisions aimed at promoting clean energy adoption, offering tax credits for various energy-efficient home improvements and investments.
- Consumers can benefit from tax credits for installing electric heat pumps, rooftop solar panels, geothermal systems, battery storage, and making energy efficiency upgrades to their homes.
- Additionally, lower- and middle-income individuals can avail themselves of consumer tax credits for purchasing used electric vehicles, incentivizing the transition to cleaner transportation alternatives.
Despite being in effect for nearly two years, opportunities presented by the Inflation Reduction Act and the broader Investing in America Agenda remain relevant for entrepreneurs. Accessing resources such as the Treasury Department’s Inflation Reduction Act Taxpayer Resource Hub can provide valuable insights into available tax credits and incentives, empowering small businesses to navigate tax policies effectively.
As discussions surrounding economic policies continue to unfold, understanding the implications of legislation like the Inflation Reduction Act is essential for entrepreneurs seeking to leverage available resources and position themselves for success in an evolving business landscape.
