The Inflation Reduction Act: How small businesses may benefit from the law

So you’ve heard about the Inflation Reduction Act (IRA), but what exactly does it mean for your small business? The answer may surprise you. Below you will find an overview of the provisions and investments in the IRA.

Lower healthcare costs 

The IRA is investing in healthcare through subsidies and caps on prescription drugs. The IRA is extending Affordable Care Act (ACA) subsidies through 2025, which will benefit small businesses and Americans alike. If you are one of the 2.6 million small businesses or sole proprietors accessing health insurance from the ACA marketplace, you’ll save up to $800 per year on average. Additionally, insulin costs will be capped at $35 per month and prescription drug expenses will be capped at $2,000 per year for Medicare patients starting next year. 

Investments in energy and climate change programs

Small businesses are eligible to receive a tax credit that will cover 30% of costs for switching to low-cost solar power. Additionally, small businesses will be able to deduct at least $1 per square foot of their business, and up to $5 per square foot if they make high energy efficiency improvements while paying a prevailing wage

If your business operates in environmental industries, such as retrofitting energy efficient HVAC units, doors, or windows, manufacturing and servicing wind turbines or solar panels, or electric vehicle supply chain, you may have more opportunities to qualify for additional subsidies. Small business owners can take advantage of a $7,500 electric vehicle credit for new vehicles (vans, SUVs and pickup trucks) or a $4,000 credit for used electric vehicles. 

The IRA is also allocating funding to support clean energy projects, creating procurement opportunities for small businesses and creating millions of good-paying jobs to transition to clean energy.

IRS improvements and other tax credits 

The IRA will invest $80 billion in funding for the Internal Revenue Service (IRS), $45 billion budgeted to auditing and enforcement. The IRS will be closely monitoring and ensuring that large corporations pay their fair share of taxes. Only businesses making more than $1 billion annually will pay the new minimum corporate tax of 15%. 

The IRA also extends the qualified business income deduction and the pass-through deduction from 2025 through 2027, providing a 20% deduction on business income. There has also been an extension of the Research and Development (R&D) tax credit, doubling the maximum amount of R&D credits to offset employer payroll taxes. If your small business has developed new products and your business is younger than 5 years old, you may be eligible for this credit. 

Learn more about how small businesses can benefit from the Inflation Reduction Act.

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