BUILD BACK BETTER ACT – The Latest
A modified version of the Build Back Better Act includes numerous changes to the tax-related provisions of the bill. Much anticipated individual, corporate, and capital gains rate increases have surprisingly been largely removed from the draft legislation. Here is a recap of some of what’s in and what’s out among the most recent changes:
Individual Provisions
OUT – Top Marginal Tax Rate of 39.6% (rates holding steady, except above incomes of $5M/$10M)
IN (but modified) – Surcharges of 5% on AGI > $10M MFJ ($5M MFS) and Additional 3% on AGI > $25M MFJ ($12.5M MFS)
OUT – Section 199A Deduction AGI Limitations (No changes)
OUT – Top Capital Gains Rate Increase to 25% (No rate increases)
IN – Net Investment Income Tax (Potentially applying to active business pass-through income)
IN – Excess Business Loss Limitations Made Permanent ($500,000 business loss limit per year)
IN – Roth IRA Limitations (No investment in related interest entities and Required Minimum Distributions thresholds for accounts with values > $20M and > $10M)
IN – Section 1202 Stock (AGI > $400k do not qualify for 75% or 100% exclusion provisions)
IN – Wash Sale Rules Expanded for Foreign Currency, Commodities and Cryptocurrency, and similar, Transactions
IN – Union Dues Qualify for an Above the Line Deduction up to $250 (new)
IN – Child Tax Credit Enhancements (Advanced Payments/Fully Refundable/Increase Amount)
IN – Child and Dependent Care Credit (Increase to $8k/$16k and made permanent)
IN – Earned Income Tax Credit (Revised application to age 19 years old without qualifying child.)
TBD – State Tax Deduction Cap ($10,000 may rise as high as $80,000 for incomes below $500,000 but no consensus has yet emerged.)
Business Provisions
OUT – Increase in Corporate Tax Rates (No corporate rate increases but a new minimum tax for $1B+ book incomes.)
OUT – Carried Interest Holding Period Increase to 5 Years (No changes)
IN – R&D Expenditure’s “Capitalize and Amortize” Delayed to After 2025 (Existing treatment continues)
The latest and greatest but expect continued negotiations to keep us on our toes as to what ultimately comes out of Washington, if anything. Stay tuned for continued updates
Ben is a trusted professional advisor providing tax, accounting, assurance and consulting services to the construction industry. As a tax principal in the Minneapolis, MN office of CLA he helps construction company's and their owners navigate industry challenges and complex tax legislation. He gained experience with 2 regional firms and a sole proprietor for 19 years prior to rejoining CLA in 2016. Ben serves as National Construction Tax Leader for CLA and is a member of the CLA Construction Strategic Leadership Team.
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