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Business Tax Services

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The Inflation Reduction Act Includes Wide-Ranging Tax Provisions

Inflation Reduction Act (IRA) was signed into law on August 16, 2022. The IRA includes significant provisions related to climate change, health care, and, of course, taxes. The IRA also addresses the federal budget deficit. According to the Congressional Budget Office (CBO), the IRA is projected to reduce the deficit by around $90 billion over the next 10 years.

Recorded Webinar: Tax Impacts for Business Owners: Inflation Reduction Act and More!

Although the IRA falls far short of Biden’s originally proposed $2 trillion Build Back Better Act, the $430 billion package nonetheless is a sprawling piece of legislation bound to affect most Americans over time. Here’s an overview of some of what the bill includes.

Inflation Reduction Act Overview

What are the 2022 Business Tax Rates and Credits?

  • Corporate Tax Rate: 21%
  • Estate and Gift Tax Exemption: The lifetime exemption is $12,060,000 with a top tax rate of 40%. A surviving spouse may be able to use the deceased spouse’s unused estate tax exemption. The annual gift tax exclusion is $16,600 per recipient ($32,300 if spouses elect “split-gift” treatment.
  • Section 199A Deduction for Owners of Pass-Through Entities: Up to 20% of qualified business income is subject to various limitations. When an owner’s taxable income exceeds $170,050 ($340,100 for joint filers), the following limits are phased in over a $50,000 range ($100,000 range for joint filers): More information
    • Deduction isn’t available for income from specified service businesses.
    • Deduction can’t exceed the greater of the owner’s share of:
    • 50% of the amount of W-2 wages paid to employees by the qualified business during the tax year, or
    • The sum of 25% of W-2 wages plus 2.5% of the cost of qualified property.
  • Bonus Depreciation now applies to both new and used items (if the used items are placed in service for the first time in the business). 100% bonus depreciation on qualifying business equipment is through 2022.
  • Research & Development (R&D) Credits are federal tax credits that allow up to 10% of eligible expenses that relate to a new or improved process or product. Credits can be utilized to offset income tax, or if eligible, employer-paid payroll taxes. Additionally, any credit can be carried back one year or forwarded up to 20 years. For more information, view our Biz Tip on R&D Tax Credits.
  • The Section 179 Deduction applies to tangible personal property, such as machinery and equipment, purchased for the business.
    • Section 179 Expensing Limit: $1,080,000
    • Section 179 Phaseout Threshold: $2,700,000
    • This deduction is also available for qualifying tangible personal property such as furniture and appliances, as well as some nonresidential real property such as roofs, ventilation, fire protection, and security systems. Read more on Section 179
  • Work Opportunity Tax Credit: If you hire individuals from a specified disadvantaged targeted group, you could be eligible for a credit worth 25-40% of their wages through 2025. Find more information on the tax credit extension.

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Services Offered: How SVA Can Help

Business professionals need easy access to information to make timely decisions. SVA has what you need, when you need it. Choose a topic below or just contact us directly. Our expertise is ready anytime you need it.

The best way to stay current on all the ways your business can save time and money is to enlist an experienced accounting firm. SVA can help you with:

  • Accounting Methods
  • Consolidated Multi-Entity Tax Returns
  • Entity Selection, Formation, and Structure Planning
  • Executive Compensation Models
  • Inventory Method Planning
  • Ownership Planning

Tax planning should occur all year long, not just at year-end. SVA’s tax team is always in the know about the latest legislation and will help you minimize your business tax burden. Along with all the tax credits listed above, SVA can also help you with:

The tax-deferred exchange remains the most important tool in planning for non-personal real estate transactions. The 1031 exchange is a swap of one investment property for another, allowing capital gains to be deferred. We work with clients to navigate the many rules and regulations that affect these transactions. We also will act on our clients’ behalf to arrange and act as a liaison between the various other professionals required to complete the transaction according to strict IRS rules.

BIZ TIP: Defer Capital Gains on Investment Properties With a 1031 Like-Kind Exchange

Everyone is familiar with sales tax and the role it plays as a consumer. However, understanding the complexities and laws involved with sales and use tax as it applies to business is another story. Reduce the impact of sales tax on not only your business but your customers by proactively planning for the tax consequences of your business-related activities.

There are many tax credits currently available, along with new ones available each year based on stimulus legislation and changing presidential leadership. Here are a few SVA can help you with:

  • Energy/Fuel Tax Credits
  • Low-Income Housing Tax Credits
  • New Markets Tax Credits
  • Rehabilitation Tax Credits
  • Research and Development Tax Credits
  • State Tax Credits
  • Wisconsin Manufacturing Tax Credits

Nexus, also known as sufficient physical presence, determines whether an out-of-state business selling products into a state is liable for collecting sales and use tax on sales into the state. Nexus is required before a taxing jurisdiction can impose its taxes on an entity. Congress enacted Public Law 86-272 which protects companies with only minimal state activities from being taxed. Our professionals can assist you in determining your company's multistate tax situation, take steps to insulate your activities from overzealous states, and minimize your overall state tax liability.

Biz Tip: What Manufacturers Should Know in the Wake of Wayfair Vs. South Dakota

Paycheck Protection Program (PPP) funds provided billions in economic relief for businesses. The program includes round 1 funding, round 2 funding and loan forgiveness opportunities. Each round has specific guidelines and determining when to apply for funds and forgiveness requires talking with a tax expert. Navigating the other credits like the Employee Retention Credit that work together with the PPP funds can be complex. SVA has a team of experts who consistently monitor the latest news regarding these programs from the SBA and legislative efforts.

Resources

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The Qualified Business Income Deduction eGuide

Are you a small business owner? Learn how you can take full advantage of the Qualified Business Income (QBI) deduction by downloading this eGuide.

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The Business Owner's Guide to R&D Tax Credits

There is a misconception that R&D tax credits are reserved for companies that have a dedicated R&D staff. The truth is any business can qualify as long as they adhere to a few simple guidelines outlined in this eGuide.

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SVA® Web Tax Guide

Visit SVA’s Web Tax Guide to access a wide array of resources that can help prepare you and your business for the upcoming tax season.

2022 Federal Tax Rates

2022 Federal Tax Rates

This easy-to-use resource has all the tax rates, deductions, credits and limits in a quick view format.

Awards and Affiliations

Forbes Names SVA as 2021 America's Best Accounting Firms
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