4 Ways Small Business Owners Benefit from the Inflation Reduction Act

Many small business owners and gig workers are still struggling in the aftermath of the pandemic. Rising inflation is increasing costs of everything from utilities to health care. The Inflation Reducation Act aims to relieve some of that pressure through expanding benefits and increasing incentives for small business owners and entrepreneurs who are just starting their businesses.

Here are four ways small business owners benefit from the Inflation Reduction Act: 

#1: Taxes and Small Business Credits

One way small business owners benefit from the Inflation Reduction Act is through changes to taxes and business tax credits.

The Inflation Reduction Act shifts some of the business tax burden to larger corporations:

• The Act implements a minimum 15% tax on corporations making over $1 billion in revenue annually.
• Small businesses earning $400,000 or less will not see their taxes go up at all. (Side note: This also applies to families earning $400,000 or less.)
• Small businesses with lower revenue could be eligible for extra funds from the refundable research and development tax credit. This tax credit can be used to help pay payroll taxes and other expenses, including research and development. Under the Inflation Reduction Act, the credit will be expanded from $250,000 to $500,000 in 2023. These changes can help keep costs down and make running small businesses more profitable. 

#2: Lower Healthcare Costs

Small business owners could also benefit from the Inflation Reduction Act’s focus on the cost of healthcare and medication.

According to tax data from 2021, 2.6 million small businesses and self-employed adults purchase health care for themselves and their employees on the health insurance exchange.

The Inflation Reduction Act extends the Affordable Care Act premium subsidies of up to $800 through 2025. It also expands eligibility to the program. 

Another way the Act works to reduce healthcare costs is by giving Medicare the power to negotiate the cost of certain medications.

It also caps prescription spending at $2,000 a year for those on Medicare. By helping limit their out-of-pocket spending on medication and lowering some medication costs, small business owners might feel some of the burden of healthcare costs eased.

#3: Energy Efficiency Incentives

Another way the Inflation Reduction Act benefits small business owners is by providing incentives to become energy efficient. Small business owners are eligible to receive a 30% tax credit to help them shift to low-cost solar power. 

In addition, small business owners can receive a tax credit for lowering their utility bill.

The Inflation Reduction Act provides a $5 per square foot of office space tax credit to those small businesses that lower their utility bills.

This will help small businesses in two ways:

1. Small businesses will receive the tax credit for lowering their bills.
2. With the lower bills, small businesses will save money over time and decrease their overall cost of doing business.

The Inflation Reduction Act includes another clean energy provision that will benefit small business owners: an incentive to switch to clean vehicles.

Small business owners who need larger vehicles like vans or trucks will receive tax credits of 30% to help cover the cost of buying commercial vehicles that run off of clean energy, like electric or fuel cell vehicles. 

#4: Expanding Rural Small Business Opportunities

The Inflation Reduction Act will also benefit rural small business owners by expanding the Rural Energy for America Program.

This program helps rural small businesses and agricultural producers make energy-efficient upgrades and shift to clean energy. The US Department of Agriculture estimates that this expansion will help more than 41,500 small businesses and farms with their energy needs.