Tax Provisions in the Build Back Better Act

Morgan Blogs Part 2

On November 19, 2021, the House of Representatives passed H.R. 5376, commonly known as the Build Back Better Act.

Included in the bill are a wide variety of tax provisions, designed to give incentives to taxpayers and raise revenue to pay for the spending in the bill.

Here are the top tax provisions that caught our eye. You can read the full text here.

Summary of tax provisions in BBB

Scroll through our list to see what tax provisions fit your business and your personal tax returns.

Year extension of the expanded child tax credit: When the American Rescue Plan Act (ARPA) went into effect in 2021, it included a provision for the IRS to give advance child tax credits. That will be extended into 2022. Also extended will be the refundability of the child tax credit beyond 2022.

Expanded earned income tax credit is extended: The ARPA also made changes to the earned income tax credit that are extended to 2022, and the increase in the earned income and phaseout amounts will be indexed for inflation.

State and local taxes deduction cap: The Sec. 164(b) limitation on the deduction for state and local taxes (SALT) will increase from $10,000 to $80,000, and will extend the limit through 2031.

Premium tax credit is extended: The amounts for premium assistance in Sec. 36B will increase through 2025. Also extended through 2025: the rule that allows the premium tax credit to certain taxpayers whose household income exceeds 400% of the poverty line.

15% minimum tax on profits of large corporations: Corporations that report over $1 billion in profits to shareholders will have a 15% tax instituted. If over any 3-year period, a corporation has an average annual adjusted financial statement income (as defined in new Sec. 56A) over $1 billion and (in the case of corporations with foreign parents) has annual adjusted financial statement income in excess of $100 million, the 15% will be added over the amount of its corporate AMT foreign tax credit.

1% surcharge on corporate stock buybacks: A new tax equal to 1% of the fair market value of any stock of a corporation that the corporation repurchases during the year will be imposed.

Limits on interest expense deduction: A new section of the tax code will limit the amount of net interest expense of certain domestic corporations (or foreign corporations engaged in a U.S. trade or business) that are members in an international financial reporting group.

Small business stock and high-income taxpayers: An amendment to Sec. 1202 will disallow the 75% and 100% exclusion of gain from the sale of stock if the taxpayer’s AGI is over $400,000 or if the taxpayer is a trust or estate.

Wash-sale rules: This section amends Sec. 1091 to make commodities, foreign currencies, and cryptoassets subject to the wash-sale rules.

Net investment income tax: An amendment to Sec. 1411 will apply the tax to net investment income derived in the ordinary course of a trade or business for taxpayers with taxable income over $400,000 (single filers), $500,000 (married taxpayers filing jointly or surviving spouses) or $250,000 (married taxpayers filing separately).

Excess business losses: The Sec. 461 limitation on excess losses of noncorporate taxpayers will be made permanent.

High-income surcharge: The bill would create a new Sec. 1A, imposing a surcharge (in addition to any other income tax imposed) on high-income individuals, estates, and trusts. The surcharge tax would equal the sum of 5% of the amount of the taxpayer’s AGI that exceeds $10 million ($5 million for married taxpayers filing separately; $200,000 for an estate or trust), plus 3% of the amount of the taxpayer’s AGI that exceeds $25 million ($12.5 million for married taxpayers filing separately; $500,000 for an estate or trust).

If you have any further questions about how these provisions apply to your tax status, give Morgan & Associates a call today, or fill out the contact form below. We can help you plan a tax strategy that maximizes your savings for your next filing.

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