The Inflation Reduction Act of 2022 (IRA) was signed into law on August 16, 2022, marking the largest federal investment in climate and energy policy in U.S. history. Originally a scaled-down version of the Build Back Better Plan, the IRA introduced sweeping tax credits for clean energy, electric vehicles, and healthcare subsidies, alongside new revenue provisions targeting large corporations and the IRS. Nearly four years later, many of these provisions have already taken effect, been modified, or been terminated by the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025. This guide breaks down what the IRA accomplished, what remains in effect in 2026, and what taxpayers and business owners need to know going forward.

What Was the Inflation Reduction Act?

The Inflation Reduction Act (P.L. 117-169) emerged from the remnants of President Biden's Build Back Better agenda. While the original proposal carried a price tag of roughly $6 trillion, the final legislation was far more modest in scope, focusing primarily on clean energy investment, healthcare affordability, and deficit reduction. The bill passed narrowly in both chambers: 220 to 207 in the House, and 51 to 50 in the Senate with Vice President Harris casting the tiebreaking vote.

The Congressional Budget Office estimated the IRA would reduce the federal deficit by approximately $238 billion over a decade, funded through new corporate taxes, a corporate alternative minimum tax, an excise tax on stock buybacks, and increased IRS enforcement funding.

IRA Energy Tax Credits: What Happened

Residential Clean Energy Credit (Section 25D)

The IRA extended and expanded the residential clean energy credit under Section 25D of the Internal Revenue Code, which covered rooftop solar panels, solar water heaters, battery storage, geothermal heat pumps, wind turbines, and fuel cells. The credit was set at 30% of installation costs with no annual dollar cap.

However, the OBBBA accelerated the termination of this credit. No Section 25D credit is available for expenditures made after December 31, 2025. The IRS has confirmed that even if a taxpayer pays for solar equipment before year-end 2025, the installation must be completed by that date for the credit to apply.

Energy Efficient Home Improvement Credit (Section 25C)

The IRA also revamped the Energy Efficient Home Improvement Credit under Section 25C, raising it to 30% of costs and replacing the old $500 lifetime cap with annual limits: $1,200 per year for most energy-efficient improvements (exterior doors, windows, insulation) and $2,000 per year for qualifying heat pumps, water heaters, and biomass stoves. These improvements had to meet ENERGY STAR requirements.

Like the Section 25D credit, the OBBBA terminated Section 25C for property placed in service after December 31, 2025. Taxpayers who made qualifying improvements during 2023, 2024, or 2025 may still claim the credit on the applicable year's return.

Clean Vehicle Credits (Sections 30D, 25E, and 45W)

The IRA expanded the clean vehicle credit beyond purely electric vehicles to include hydrogen fuel cell vehicles and other "clean vehicles." It introduced credits for new clean vehicles (up to $7,500 under Section 30D), used clean vehicles (up to $4,000 under Section 25E), and commercial clean vehicles (Section 45W). The law also eliminated the per-manufacturer 200,000-vehicle cap that had previously disqualified popular brands like Tesla and General Motors.

The OBBBA terminated all three clean vehicle credits for vehicles acquired after September 30, 2025. New user registrations through the IRS Energy Credits Online portal closed on that same date. For tax professionals and taxpayers filing 2025 returns in 2026, the key task is confirming eligibility and documentation for vehicles acquired before the October cutoff.

EV Charging Equipment Credit (Section 30C)

The IRA revived and expanded the Alternative Fuel Vehicle Refueling Property Credit under Section 30C, providing up to $1,000 for residential installations and up to $100,000 for commercial installations. This credit was also terminated by OBBBA for property placed in service after December 31, 2025.

Healthcare Provisions

ACA Premium Subsidies

The IRA extended the enhanced Affordable Care Act (ACA) premium tax credits through the end of 2025. These subsidies, originally introduced by the American Rescue Plan Act of 2021, eliminated the "subsidy cliff" for households earning above 400% of the Federal Poverty Level and capped benchmark Silver plan premiums at 8.5% of household income.

The enhanced subsidies expired on December 31, 2025, and the OBBBA did not extend them. As a result, the subsidy cliff returned for the 2026 plan year, meaning households above 400% FPL now pay full market price. Congressional leaders have introduced competing extension proposals (including the CARE Act), but as of mid-2026, no extension has been enacted.

Medicare Prescription Drug Reforms

The IRA's Medicare provisions have largely taken effect on schedule. Medicare drug price negotiation resulted in negotiated prices for the first 10 drugs, which went into effect on January 1, 2026. The selected medications treat conditions including diabetes, cancer, blood clots, heart failure, and chronic kidney disease. An additional 15 drugs (including Ozempic) are slated for negotiated prices beginning in 2027.

The $2,000 annual cap on out-of-pocket prescription drug costs for Medicare Part D beneficiaries took effect on January 1, 2025, as originally scheduled. The OBBBA did limit the scope of future drug negotiations, which the Kaiser Family Foundation estimates could increase Medicare spending by at least $5 billion.

Revenue Provisions Still in Effect

Corporate Alternative Minimum Tax (CAMT)

The IRA imposed a 15% Corporate Alternative Minimum Tax on corporations with average annual adjusted financial statement income exceeding $1 billion over a three-year period. This applies to taxable years beginning after December 31, 2022, and remains in effect. Large corporations must compute both their regular tax liability and the CAMT and pay the greater of the two. The IRS has issued extensive interim guidance (Notice 2025-49, Notice 2026-7) to clarify the application.

Stock Buyback Excise Tax

The IRA introduced a 1% excise tax on stock repurchases by publicly traded corporations, effective for repurchases after December 31, 2022. The IRS released final regulations in November 2025 (T.D. 10037) clarifying the tax's application to reorganizations, take-private transactions, and the netting rule. The OBBBA subsequently increased the excise tax rate from 1% to 4% for repurchases occurring after July 4, 2025.

IRS Funding: From $80 Billion to $38 Billion

The IRA originally allocated approximately $79.4 billion in supplemental funding to the IRS over 10 years, with priorities including enforcement ($45.6 billion), operations ($25.3 billion), technology modernization ($4.8 billion), and taxpayer services ($3.2 billion). The goal was to close the federal "tax gap," which the IRS estimates at roughly $688 billion per year.

Congress subsequently rescinded a total of $41.8 billion from the enforcement allocation through three separate actions. The Fiscal Responsibility Act of 2023 rescinded $1.4 billion, the FY2024 appropriations act rescinded $20.2 billion, and the FY2025 appropriations act rescinded another $20.2 billion. According to the Treasury Inspector General for Tax Administration (TIGTA), remaining IRA funding stood at approximately $37.6 billion as of March 2025.

The reduced enforcement funding has drawn scrutiny. The Congressional Budget Office projected that the rescissions would reduce revenue collections by an estimated $65.8 billion through 2034.

Impact on Inflation

Despite its name, most economists concluded that the Inflation Reduction Act would have a negligible near-term effect on inflation. The Penn Wharton Budget Model and the Congressional Budget Office both expressed limited confidence in the legislation's ability to lower consumer prices. The law's primary economic impact came through its clean energy investment incentives and healthcare subsidies rather than through direct anti-inflationary mechanisms.

What Arizona Taxpayers Should Know

Arizona does not impose a state-level income tax on the IRA's federal credits (Arizona uses a 2.5% flat income tax rate applied to federal adjusted gross income with specific modifications). However, Arizona taxpayers should be aware of several practical implications:

  • Solar installations: Arizona homeowners who installed rooftop solar through 2025 may have claimed both the federal Section 25D credit and the Arizona residential solar energy credit (25% of costs, up to $1,000). Both credits are no longer available for new installations in 2026. For more on energy-related tax strategies, see our guide on U.S. energy investments.
  • Electric vehicles: Arizona does not impose a state sales tax on vehicle purchases (vehicle purchases are subject to Transaction Privilege Tax). The federal EV credit provided a meaningful offset through September 2025 but is no longer available.
  • Healthcare marketplace: Arizona marketplace enrollees who benefited from enhanced ACA subsidies saw premiums increase for 2026 plan year. Those affected should review their coverage options through HealthCare.gov or consult with a licensed agent.

Frequently Asked Questions

Is the Inflation Reduction Act still in effect?

Parts of it are. The corporate alternative minimum tax, the stock buyback excise tax (now at 4%), and Medicare drug price negotiation remain in effect. However, all individual clean energy credits (25C, 25D, 30D, 25E, 45W, 30C) were terminated by the OBBBA, and the enhanced ACA subsidies expired at the end of 2025.

Can I still claim a tax credit for solar panels in 2026?

Only if the solar installation was completed on or before December 31, 2025. The residential clean energy credit (Section 25D) does not apply to expenditures made after that date, even if you paid for the system before year-end.

What happened to the electric vehicle tax credit?

The clean vehicle credits under Sections 30D, 25E, and 45W were terminated for vehicles acquired after September 30, 2025. If you purchased or leased a qualifying vehicle before that date, you may still claim the credit on your 2025 tax return.

Did the IRA actually reduce inflation?

Most independent analyses, including those from the Penn Wharton Budget Model and the CBO, found that the IRA had minimal direct impact on inflation. Its primary effects were channeled through clean energy investment and healthcare cost reduction rather than broad price stabilization.

How much IRS funding is left from the IRA?

Approximately $37.6 billion as of March 2025, down from the original $79.4 billion. Congress rescinded $41.8 billion from the enforcement allocation through appropriations legislation in 2023, 2024, and 2025.

How K&R Taxes Can Help

If you claimed IRA energy credits in prior years and need help with documentation, or if you are filing a 2025 return that includes clean vehicle or residential energy credits from before the OBBBA termination dates, accurate tax preparation is essential. The interplay between expired federal credits, Arizona-specific tax credits, and evolving IRS enforcement priorities makes professional guidance especially valuable. Contact K&R Taxes to schedule a consultation, or explore our full range of tax services including strategic tax advisory and preparation, business accounting, and IRS representation.