This comprehensive bill targets making health care and prescription drugs more affordable, fighting climate change, taxing wealthy corporations, and more funding for the IRS.

Although the President has signed this bill, some savings in the bill won’t kick in right away. For example, efforts to lower drug prices, including caps on their costs for seniors, won’t take effect until 2025.  Studies have also shown the bill won’t reduce inflation, but others argue it will. Only time will tell.

Pivotal items in this legislation include: 

• The creation of a 15% corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15%. Taxes on individuals will not be increased, and stock buybacks by corporations will have a 1% excise tax.
  
• Prescription drug price reform: Medicare will be allowed to negotiate the price of certain prescription drugs, bringing down the price recipients will pay for their medications. Starting in 2025, Medicare receivers will have a $2,000 cap on annual out-of-pocket prescription drug costs.
  
• IRS tax enforcement: For several years the IRS has declared they are understaffed and funded poorly, making it impossible to operate at full capacity.The bill invests $80 billion in the IRS over the next 10 years, allowing them to upgrade their systems and adequately staff their offices for resolving taxpayer issues.
  
• The IRS commissioner has pledged not to use the extra funding to audit small business or lower income taxpayers who earn less than $400,000.  He noted that other resources would be invested in hiring, training, and IT systems that will allow the agency to better serve all taxpayers.
  
• Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which were scheduled to expire at the end of this year, will be extended through 2025.
  
• Energy security and climate change investments: The bill includes numerous investments in climate protection, including tax credits for households to offset energy costs, investments in clean energy production, and tax credits aimed at reducing carbon emissions.

By signing this bill into law, President Biden hopes the Inflation Reduction Act will tackle the climate crisis, uplift the lower classes, and support American workers by creating good-paying, union jobs across the country.

The post Everything You Need to Know About the Inflation Reduction Act appeared first on Direct Tax Relief.

The Obama years saw the Bush tax cuts made permanent for all but the wealthiest, plus new Obamacare levies. Now the question of how much of your paycheck you’ll get to keep—and who should pay more or less—is back on the table in a big way.

Clinton’s Tax Plans

Clinton promises to avoid raising taxes on anyone making less than $250,000 a year. But for the wealthy, she proposes pegging the value of most deductions (with the exception of charitable contributions) at 28% of taxable income, lessening their value for anyone in or above the 33% tax bracket, which kicks in at $231,450 for joint filers, $190,150 for singles.

The rich would get even more bad news, including a 4% surcharge on income above $5 million and a top estate tax rate of 65% (up from 40%) on the largest estates: $500 million for a single, $1 billion for a couple. Also, there’s the Buffett Rule, a minimum overall income tax rate of 30% for those earning more than $1 million. “Millionaires shouldn’t be paying a lower rate than the middle class,” says Clinton adviser Michael Shapiro, echoing Clinton fan Warren Buffett, who has said his effective tax rate is lower than his secretary’s.

Trump’s Plan

Trump wants a tax cut “across the board.” He proposes increasing the standard deduction (what you use when you don’t itemize) to $30,000 for joint filers, from $12,600 now, ensuring that families earning less than that would owe no income taxes.

However, Trump would also deep-six the personal exemption—the $4,050 write-off you can claim for each member of a household—eliminating a boon for parents. To simplify the tax code, he would pare the current seven brackets, ranging from 10% to 39.6%, to three. And he wants to scrap the estate tax, the alternative minimum tax, and, as part of repealing Obamacare, the 3.8% surtax on investment income, paid by those earning more than $250,000 ($200,000 if single).

Most dramatic is what he would do for business owners. He proposes lowering the corporate tax rate to 15% from 35% and—this is the radical part—he has floated the idea of applying that lower rate not just to large, public companies but also to the self-employed and business owners. In other words, dentists, law partners, and Trump himself.

What the Presidential Tax Plans Mean for You

The size of your tax bill isn’t likely to change much if Clinton wins unless you are wealthy. Those earning $133,000 and up would see an average tax hike of about $1,600, according to the Tax Foundation. But as the graphic below shows, under Clinton’s plans, the highest earners will bear the brunt of that.

With Trump’s framework, the Tax Foundation analysis shows that even middle-class earners—those making roughly $50,000 a year—get more than $1,000 back. But Trump’s plan to end personal exemptions could leave some parents behind. The top 1% of earners, on the other hand, would be up by more than $100,000. They “will make out like a bandit,” says Tax Policy Center fellow Roberton Williams.

Regardless of which party wins the Presidential election, let Direct Tax Relief assist with tax preparation services to help you win.  We can prepare your taxes as well as help with tax debt relief for outstanding taxes. Contact us today for a no-cost or obligation consultation with one of our case managers.

The post Where the Candidates Stand on Your Taxes appeared first on Direct Tax Relief.