The Inflation Reduction Act and Your Taxes: What's Left?
The Inflation Reduction Act changed tax policy, with new and expanded clean energy and other tax credits, many of which have been ended under the second Trump administration.
The Inflation Reduction Act (IRA) was sweeping legislation passed during the Biden administration designed to address the high cost of prescription drugs, healthcare availability, climate change, and the need to raise tax revenue.
The law contained various clean energy tax credits and other tax incentives. But many of those key provisions have changed since the start of the second Trump administration and the passage of the 2025 Trump tax bill.
Inflation Reduction Act: Small business and middle-class income taxes
Most of the IRA was designed not to increase taxes on small businesses or families making $400,000 or less. However, the actual tax effect over time remains to be seen.
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Under the IRA, however, some corporations were expected to pay more tax than they did in the past.
For example, under the legislation, large businesses with more than $1 billion in reported income were subject to a 15% minimum corporate tax rate. The IRA also included an excise tax on corporate stock buybacks.
Those provisions were supposed to help address the fact that some large companies you may be familiar with, like Nike or Amazon, generally pay very little in federal taxes.
Affordable Care Act premium tax credits
The Inflation Reduction Act also extended the expanded Affordable Care Act (ACA) program through 2025, so eligible individuals and families who purchase their health insurance through the federal Health Insurance Marketplace could benefit from lower health care premiums.
The ACA’s premium tax credit was designed to help people with low and middle incomes pay for health insurance purchased through the healthcare marketplace (i.e., HealthCare.gov). Health insurance can also be purchased through some state exchanges.
- Eligibility for the ACA premium tax credit program was temporarily expanded during the COVID-19 pandemic to allow more individuals and families to claim the refundable tax credit.
- As a result, the ACA premium tax credit was extended for three more years.
Note: The expanded ACA premium tax credits expired at the end of 2025. Because Congress did not extend them into 2026, marketplace premiums have increased for millions of enrollees, and rules governing the repayment of excess advance subsidies became stricter.
Clean energy tax credits for homeowners
To support clean energy, the IRA provided new tax credits. Other energy-related tax credits were extended.
Solar Project Tax Credit: For example, the law included a 10-year extension of the homeowner credit for solar projects, like rooftop solar panels.
But it also had potential positive implications for people interested in using solar panels to charge their electric vehicles. That’s because if you were eligible for both home and residential solar tax breaks and the federal EV charger tax credit, you could reap the benefits of two significant clean energy tax incentives in the IRA.
- The solar project tax credit could also benefit people who purchase energy-efficient water heaters, heat pumps, and HVAC systems.
- Besides solar incentives, affordable housing could also increase because the Inflation Reduction Act creates a $1 billion incentive program for energy-efficient affordable housing.
- For more information about how the IRA can impact homeowner tax credits, see Tax Credits for Energy-Efficient Home Improvements.
Note: These residential clean energy tax credits were terminated early under the 2025 Trump/GOP tax bill and are disallowed for any property placed in service or expenditures made after December 31, 2025
EV tax credit
The IRA also contained an electric vehicle tax credit. The existing tax credit for buying a new or used electric vehicle was initially extended for 10 years, until December 2032.
The federal EV tax credit applied to any “clean vehicle,” which included hydrogen fuel cell cars.
- However, the IRA set income limits on who can claim the EV tax credit and limits the manufacturers' retail sales price (MSRP) of the cars that qualify for the EV tax credit.
- Those limits effectively excluded higher-priced luxury electric vehicles.
- The IRA also removed the 200,000-car cap for claiming the EV tax credit, to allow manufacturers like Tesla, General Motors, and Toyota to qualify for the tax credit.
Also, there is an EV tax credit change as of 2024. Eligible car buyers can take the EV tax credit as a discount at the time of the car purchase.
You are effectively transferring the credit to a registered dealer who could reduce the price of the vehicle by the EV tax credit amount. That means you don't have to wait until you file your tax return to benefit from the federal clean vehicle tax break.
The IRA also revives the federal EV charger tax credit for electric vehicle charging stations and equipment that had expired several years ago.
Note: Under the 2025 Trump tax bill, the federal EV tax credits for both new and used vehicles were officially repealed for any vehicle acquired after September 30, 2025.
Additionally, home EV charging infrastructure credits (Section 30C) are completely phased out unless the equipment is fully placed in service before June 30, 2026.
For more information about EV-related tax credits, see How the EV Tax Credit Works and What to Know About the Federal Tax Credit for EV Chargers.
IRS enforcement
The Inflation Reduction Act included $80 billion in additional funding over ten years for the IRS. The funds were supposed to help improve tax compliance, which in turn could increase federal revenue by an estimated $203 billion.
It's important to note that billions of those funds have since been clawed back in budget negotiations, but the IRS had planned to use a significant portion to improve IRS tax enforcement with high earners.
That included increasing staffing levels, modernizing outdated processing systems, and improving IRS operations.
Note: With a second Trump administration in the White House, the Republican-led Congress is currently debating the future of the IRS, its workforce, and its funding. Budget reconciliation bills in late 2025 eliminated much of the remaining $45.6 billion designated for high-income tax enforcement under the IRA.
Medicare prescription drugs
In addition to clean energy tax credits and higher taxes for some corporations, the IRA contains provisions that allow Medicare to negotiate lower prices for some prescription drugs.
- A key change is that out-of-pocket costs for covered Medicare prescription drugs will be capped at $2,000 per year, beginning this year, 2025. That cap will be adjusted yearly for inflation.
- As of January 2023, people who take insulin and have Medicare prescription drug coverage have their out-of-pocket cost capped at $35 for a month’s supply. Additionally, under the IRA, Part D adult vaccines for people with Medicare were available at reduced cost beginning in 2023.
- The Centers for Medicare and Medicaid Services has more information on how the IRA impacts the costs of Medicare prescription drugs.
Update: While these Medicare provisions are being implemented, Congress is engaged in ongoing discussions about potential changes to healthcare policy, including prescription drug pricing.
Any new legislation could impact the scope or duration of these benefits in future years.
Related
- How the EV Tax Credit Works
- The Federal Tax Credit for EV Chargers: What to Know Now
- Tax Credits for Energy-Efficient Home Improvements
