The Inflation Reduction Act (IRA) aims to provide, “transformational change” for tax payers. After being signed into law by President Biden in 2022, set to impact fiscal years 2023-2031, we can all expect to see strides towards modernizing the IRS following decades of under funding.
The IRA promotes transparency and success for tax payers. The Department of Treasury has stated that, “The IRS will help taxpayers get it right, and taxpayers will be able to seamlessly interact with the agency in the ways that work best for them. For the first time, the IRS will help taxpayers claim the credits and deductions for which they are eligible.” The intention of the IRA is to ensure these four pivotal objectives:
- Provide top-of-the-line service to taxpayers
- Help taxpayers file and understand their eligibility the first time
- Ensure high earners and corporations pay the taxes they owe
- Support the IRA’s clean energy investments
Credits and deductions available are related to clean energy, low income communities, and payroll for businesses.
Credits for Families, Dependents, and Students
The IRS offers a variety of tax credits for families, dependents, and students to help reduce tax payments or increase refunds. These include the Earned Income Tax Credit (EITC) for low-income workers, the Child Tax Credit for parents, and educational credits for eligible students. Each credit has specific eligibility requirements and benefits. For detailed information on how to qualify and claim these credits, visit the IRS page on Family, Dependents, and Students Credits.
Clean Vehicle and Energy Credits
These credits aim to reduce the cost of clean technology adoption, including plug-in electric vehicles, home energy systems, and other eco-friendly investments. Each credit has specific eligibility requirements and application guidelines. For detailed information on how to qualify and claim these energy-saving incentives, visit the official IRS Clean Vehicle and Energy Credits page.
Credits and Deductions for Individuals
There are various tax benefits available to reduce taxable income or increase refunds. These include deductions for education expenses, retirement savings, and health care, as well as credits for dependent care, energy-efficient home improvements, and more. Each credit or deduction has specific eligibility rules and application processes. For detailed information and guidance on maximizing your tax savings, visit the official IRS Credits and Deductions for Individuals page.
Credits and Deductions for Businesses
The IRS now offers tax incentives to businesses to lower their tax liability. It covers various credits and deductions, including those for hiring certain employees, investing in energy-efficient equipment, and making accessibility improvements. Eligibility requirements and application processes vary depending on the credit or deduction. For more details on how businesses can reduce taxes and claim benefits, visit the official IRS Business Credits and Deductions page.
On the Strategic Operation Plan
The Strategic Operating Plan outlines how the IRS will leverage IRA funding to enhance taxpayer services, deliver world-class customer support, while pursuing large-scale noncompliance cases to recover hundreds of billions in revenue and reduce the national deficit.
What does this look like long-term? To best answer the question, let’s take a look at what happened in 2024. The key achievements of the IRA in 2024 include the following:
- Answering over one million more phone calls,
- Reducing average wait times to only three minutes,
- Expanding taxpayer assistance center hours,
- Launching new digital tools such as, “direct File” and, “IRS ECO” for clean energy benefits.
Positive strides were made in 2024, and continued positive change will depend on stable funding throughout the plan’s execution.
In conclusion, the Inflation Reduction Act, Strategic Operating Plan, and various tax credits reflect a significant investment in modernizing the IRS and enhancing taxpayer experiences. The IRA’s focus on clean energy incentives, improved customer service, and equitable tax compliance aims to create a more transparent and efficient system. As demonstrated by key successes in 2024, continued stable funding will be crucial to maintaining progress. Whether individuals or businesses, taxpayers now have access to valuable credits and resources that promote savings, sustainability, and streamlined tax processes for years to come.
Citations:
1. Department of Treasury: IRS Strategic Operation Plan
2. IRS: IRA
3. IRS: Credits & Deductions
