Tax Laws & Changes FAQ
1. What is the Inflation Reduction Act of 2022?
Electric vehicle tax credit: The electric vehicle tax credit has been extended and expanded. Previously, the credit was capped at 200,000 vehicles per manufacturer, but this cap has been removed. Taxpayers can now claim a credit of up to $7,500 for the purchase of a new electric vehicle, and the credit is also available for used electric vehicles.
Clean energy tax credits: The Inflation Reduction Act includes a number of tax credits for clean energy projects, such as solar and wind power. These credits are designed to encourage investment in renewable energy and help reduce greenhouse gas emissions.
Business tax credits: The Inflation Reduction Act includes a number of tax credits for businesses, such as a research and development tax credit and a tax credit for hiring apprentices. These credits are designed to help businesses grow and create jobs.
2. What are the tax implications of the American Rescue Plan Act of 2021?
Child tax credit: The child tax credit was increased to $3,600 per child under the age of 6 and $3,000 per child between the ages of 6 and 17. The credit was also made fully refundable, meaning that taxpayers with no income tax liability could still receive the credit.
Earned income tax credit (EITC): The EITC was increased for workers without children. Taxpayers can now claim a credit of up to $1,502, up from $529.
Student loan forgiveness: The American Rescue Plan Act made student loan forgiveness tax-free through 2025. This means that taxpayers who have student loan debt forgiven will not have to pay taxes on the forgiven amount.
3. What are the tax implications of the Bipartisan Safer Communities Act?
Mental health tax credit: The Bipartisan Safer Communities Act created a new tax credit for mental health expenses. Taxpayers can now claim a credit of up to $1,000 per year for qualified mental health expenses, such as therapy and medication.
School safety tax credit: The Bipartisan Safer Communities Act also created a new tax credit for school safety expenses. Taxpayers can now claim a credit of up to $500 per year for qualified school safety expenses, such as security cameras and mental health training for teachers.
4. How will the Inflation Reduction Act of 2022 impact taxpayers?
Key tax concepts and terminology: