New year, new tax laws

With the new year come new tax laws. One new tax law, called the "Inflation Reduction Act" (IRA), makes the largest investment in combating climate change in U.S. history, lowers the cost of prescription drugs and raises taxes on corporations. Below are some significant changes:

• Creation of a 15 percent corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15 percent. Additionally, stock buybacks by corporations will face a 1 percent excise tax. Please note taxes on individuals will not be raised.

• Prescription drug price reform: The IRA will allow Medicare to negotiate the price of certain prescription drugs, bringing down the price consumers will pay for their medications. Those who take insulin will see a $35 a month out-of-pocket spending cap on the medicine in 2023. There are more than 7 million Americans who rely on insulin every day. In 2024, the law eliminates the 5 percent coinsurance for Part D catastrophic coverage. Furthermore, beginning in 2025 all Medicare beneficiaries, regardless of income, will enjoy a $2,000 cap on out-of-pocket prescription drug spending.

• IRS tax enforcement: The law invests $80 billion dollars over 10 years in the nation’s tax agency, which has been underfunded for years.

• Affordable Care Act  subsidy extension: ACA subsidies which were due to expire at the end of 2022 will be extended through 2025. It will allow consumers to continue to buy insurance with lower premiums through the Health Insurance Marketplace. About 3 million Americans would lose their health coverage if these subsidies weren’t weren’t extended.

Next week I will discuss new clean energy credits available to taxpayers.

Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.

We depend on the support of readers like you to help keep our publication strong and independent. Join us.