What the Inflation Reduction Act Means for Your Taxes in 2025

Introduction

The Inflation Reduction Act (IRA), signed into law in 2022, introduced significant tax provisions that impact individuals, businesses, and self-employed taxpayers. In 2025, several key provisions continue to affect tax credits, IRS enforcement, energy incentives, and corporate taxation.

This article breaks down how the Inflation Reduction Act affects your 2025 taxes, referencing Internal Revenue Code (IRC) sections, discussing IRS forms, and providing examples to help taxpayers navigate these changes.

Key Tax Provisions of the Inflation Reduction Act

The Inflation Reduction Act includes several tax-related changes, primarily affecting:

• Tax credits for energy-efficient home improvements and electric vehicles
• IRS enforcement and audits
• Healthcare premium tax credits
• Corporate tax changes

Expanded Tax Credits for Energy-Efficient Home Improvements

The Inflation Reduction Act extends and expands the Energy Efficient Home Improvement Credit under IRC § 25C.

What’s New in 2025?

• Taxpayers can claim a 30% credit on qualified home improvements, up to $1,200 per year.
• Specific maximum credit amounts for individual upgrades:
  • $600 for energy-efficient windows
  • $500 for doors
  • $2,000 for heat pumps and biomass stoves
• IRS Form to Use: Form 5695 (Residential Energy Credits)

Example: How This Credit Works

Emma installs new energy-efficient windows ($2,000) and a heat pump ($5,000) in 2025. She can claim:

• $600 credit for windows
• $2,000 credit for the heat pump
• Total tax credit = $2,600

Electric Vehicle (EV) Tax Credit Changes

Under IRC § 30D, the Inflation Reduction Act expanded the Clean Vehicle Credit for electric vehicle (EV) purchases.

What’s New for 2025?

• Credit of up to $7,500 for new EVs and $4,000 for used EVs
• Income limits apply: 
  • Single filers: Income limit $150,000
  • Married filing jointly: Income limit $300,000
• IRS Form to Use: Form 8936 (Qualified Plug-in Electric Drive Motor Vehicle Credit)

Example: Claiming the EV Credit

John buys a new EV for $40,000 in 2025. Since the vehicle qualifies, he claims the $7,500 tax credit, reducing his tax liability.

Increased IRS Enforcement: What It Means for Taxpayers

The Inflation Reduction Act allocated $80 billion in funding to the IRS for improved enforcement, audits, and taxpayer services.

How IRS Audits Are Changing in 2025

• Increased audits for high-income earners ($400,000+ income)
• Greater scrutiny on small businesses and cryptocurrency transactions
• More enforcement on unreported foreign assets (FBAR requirements under IRC § 6038D)

Example: Who Might Face an Audit?

Mike, a self-employed consultant, claims $50,000 in business deductions on Schedule C. If his deductions seem excessive compared to his income, he may face increased scrutiny from the IRS.

Healthcare Premium Tax Credit Extension

The Inflation Reduction Act extended the Premium Tax Credit (PTC) under IRC § 36B, making health insurance more affordable for taxpayers enrolled in Marketplace plans.

What’s New for 2025?

• Expanded subsidies for low- and middle-income taxpayers
• No income cap for eligibility (previously, taxpayers earning over 400% of the federal poverty level were ineligible)
• IRS Form to Use: Form 8962 (Premium Tax Credit)

Example: How the Premium Tax Credit Helps

Sarah earns $50,000 and purchases a Marketplace health plan costing $600/month. She qualifies for a $400 monthly credit, reducing her premium to $200/month.

Corporate Tax Changes Under the Inflation Reduction Act

The Inflation Reduction Act introduced a 15% corporate minimum tax under IRC § 55 for corporations with $1 billion+ in profits.

What Businesses Need to Know

• This tax affects large corporations but not small businesses.
• A 1% excise tax applies to corporate stock buybacks.

Example: Corporate Tax Impact

A major tech company earns $2 billion in profits but previously used deductions to lower its tax bill. Under the new 15% minimum tax, it must pay at least $300 million in federal taxes.

7. Step-by-Step Guide to Claiming Inflation Reduction Act Tax Credits

1. Check Eligibility – Determine if you qualify for energy, EV, or healthcare tax credits.
2. Keep Documentation – Maintain receipts for home improvements, EV purchases, and healthcare premiums.
3. Use the Correct IRS Forms – File Form 5695 for energy credits, Form 8936 for EV credits, and Form 8962 for healthcare credits.
4. Consult a Tax Professional – Ensure compliance and maximize tax savings.

Conclusion

The Inflation Reduction Act continues to impact taxes in 2025, providing valuable tax credits for energy efficiency, electric vehicles, and healthcare, while also increasing IRS enforcement.

To understand how these changes affect your tax situation, schedule a meeting with Anshul Goyal, CPA EA FCA for expert tax guidance. Book an appointment here:

About Our CPA

Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant (CPA) in the United States, an Enrolled Agent (EA) admitted to practice before the IRS, and a cross-border tax expert. He specializes in IRS compliance, tax litigation, and assisting American businesses and Indian expatriates in managing U.S. tax obligations.

Frequently Asked Questions (FAQs)

1. How does the Inflation Reduction Act affect my 2025 taxes?

It provides expanded tax credits for home energy improvements, electric vehicles, and healthcare premiums, while also increasing IRS enforcement on high-income earners and businesses.

2. What tax credits are available for energy-efficient home improvements?

The Energy Efficient Home Improvement Credit allows taxpayers to claim up to $1,200 per year for qualifying home upgrades.

3. Can I still get a tax credit for buying an electric vehicle in 2025?

Yes, the Clean Vehicle Credit provides up to $7,500 for new EVs and $4,000 for used EVs, subject to income limits.

4. Who is most likely to face an IRS audit under the new law?

High-income taxpayers earning over $400,000, small business owners with large deductions, and cryptocurrency investors may face increased audit risk.

5. What is the new corporate minimum tax under the Inflation Reduction Act?

Large corporations earning $1 billion+ in profits must pay at least 15% in federal taxes, regardless of deductions.