Andrew Rosen, Contributor
Aug. 25, 2022
The Inflation Reduction Act of 2022 may bring changes to many Americans – what does it have in store for retirees? While it’s designed ultimately to reduce inflation, there are components that relate to the ACA, Medicare, taxes and energy, so it will impact other aspects of your life.
Tax Implications For Retirees
The Inflation Reduction Act has specifically stated that there will not be a new tax for any family that makes less than $400,000 per year. It also has promised not to implement new taxes on small businesses.
While there may not be a change for individuals and small businesses, the Inflation Reduction Act does plan to close loopholes for corporations by enforcing a 15% minimum tax for those with profits over $1 billion per year. The IRA also plans to tax corporate stock buybacks via a 1% excise tax.
For retirees, you likely won’t notice a difference in your tax situation, unless your income is over $400,000 per year.
The Affordable Care Act Subsidies And Retirees
The Inflation Reduction Act plans to extend federal subsidies for the ACA (Affordable Care Act) through 2025. This change will help an estimated 13 million Americans afford healthcare. It will provide subsidy relief for Medicare Part D premiums and deductibles which will certainly impact some retirees.
Changes To Prescriptions In The Inflation Reduction Act
The most notable changes for retirees in the Inflation Reduction Act have to do with prescriptions and prescriptions prices. The IRA will cap out of pocket costs for seniors at a maximum of $2,000 per year while allowing Medicare the ability to negotiate prices – with the ultimate intent of lowering prescription drug costs for seniors. Insulin in particular will be capped for Medicare enrollees at $35 per month, which should help ease the financial strain for some retirees.
The Inflation Reduction Act also includes inflation controls, where pharmaceutical companies will be penalized for imposing price increases beyond inflation.
Under the Inflation Reduction Act, vaccines will be covered for both Medicare and Medicaid participants, further reducing medical costs for retirees.
While perhaps not the most impactful for retirees, the energy subsidies included in the Inflation Reduction Act may still be helpful for a retired population. There are several credits included in the Act that provide relief for those purchasing electric vehicles, either new or used.
There are also energy rebates available for low-income households for various energy-efficient appliances, such as heat pumps or hot water heaters. These rebates can help with the cost of the item and installation, and the energy savings can help with reducing the cost of operation over the course of ownership.
The Inflation Reduction Act has several phased changes planned over the next few years, but the most impactful portions that will help low-income retirees will be enacted in the first phase.
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