Why Stock Buybacks Could Accelerate in Q4

A new tax on stock buybacks is set to go into effect in 2023, leading many companies to announce accelerated share repurchase plans in the fourth quarter.

stack of hundred-dollar bills for stock buybacks
(Image credit: Getty Images)

Whether you are for or against them, stock buybacks could accelerate as the end of the year nears. This is because the Biden administration's excise tax on share repurchases – introduced as part of the Inflation Reduction Act (IRA) signed into law in mid-August – is set to go into effect at the start of 2023. 

When a company buys back their stock, it removes the shares from the marketplace, which in turn, can boost earnings per share and the per-share price – maximizing shareholder value. Beginning Jan. 1, public companies based in the U.S. must pay a 1% tax on their share repurchases, no matter the size. At the same time, the IRA implemented a 15% alternative minimum tax (AMT) on corporations with book income over $1 billion.

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Will Ashworth
Contributing Writer, Kiplinger.com

Will has written professionally for investment and finance publications in both the U.S. and Canada since 2004. A native of Toronto, Canada, his sole objective is to help people become better and more informed investors. Fascinated by how companies make money, he's a keen student of business history. Married and now living in Halifax, Nova Scotia, he's also got an interest in equity and debt crowdfunding.