The Winds of Change: What This Year’s Tax Bills Mean for Taxpayers
Published on by Laura Hunter, Faith Gerhardstein, in Consulting, COVID-19, Tax Services
There are a couple tax bills that have been in the works in 2021 that may have a large effect on taxpayers in upcoming years. The two bills that will enact changes are: The Bipartisan Infrastructure Bill (Infrastructure Investment and Jobs Act), signed into law by President Biden on November 15th and the Build Back Better Act, which is still being reviewed by the Senate as of this writing.
The infrastructure bill is designed to improve our country’s infrastructure, including roads, bridges, airports, the electric grid, electric vehicles, etc. It is especially important to the Cincinnati area, as the Brent Spence Bridge is considered by many to be high on the priority list. How will we afford this trillion-dollar bill? A couple of provisions included are to extend the Federal Highway Excise Tax, increase reporting requirements on cryptocurrencies, and suspend the ERTC Credit after September 30th, 2021.
The larger bill that will affect the tax landscape in upcoming years is the Build Back Better Act. The Build Back Better Framework Agreement was originally issued on October 28, 2021 and was further clarified by the Senate Finance Committee’s tax provisions announced on December 11th, 2021. If passed, the money from this bill will be going towards universal preschool, implementing and extending tax credits, improving Medicaid coverage and home care services, and incentives for clean energy and extending the Affordable Care Act.
There is concern about how the Government will collect money to help pay for the spending provisions of the bill, and there are a couple big changes that will increase the tax burden for certain taxpayers. There will be a tax increase for high-income individuals; this will include disallowing gain exclusions on the sale of small business stock, expanding the Net Investment Income Tax (3.8% tax) to include non-passive income derived in the ordinary course of a trade or business, and a 5% surtax on households with an AGI above $10 million with an additional 3% surtax on those with an AGI above $25 million.
Although there are a lot of changes on the individual side, the Build Back Better Act will also increase the corporate tax rate on large corporations (those with at least $1 billion in book profit) to a minimum tax rate of 15%, as well as some international tax provisions. The House included a new SALT (State and Local Tax) cap for itemized deductions in their passed BBB Act. The limit is currently $10,000 which would be increased to $80,000. However, the SALT cap is currently not in the Senate Version of the bill. It’s worth noting that Senators Sanders and Menendez have proposed exempting non-high-income taxpayers from the $10,000 cap.
The Build Back Better Bill is still in progress, making everything very fluid at this point. As of December 20th, 2021, Democratic Senator Manchin spoke out in opposition of the BBB Bill, putting a major halt in the bill’s passing. It now appears unlikely that anything will clear the Senate in 2021.
Watch the recording, and get the slideshow presentation for of the 2021 Tax Team Signature Event here: The Winds of Change – What You Need to Know about the New Tax Climate.
Questions? The Barnes Dennig tax team will continue to provide updates and would be happy to answer your questions. Please feel free to contact a member of our team online, or call 513-241-8313 to discuss further.
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