While many components of the Build Back Better Act are still in limbo, last Thursday, October 28th, the House Rules Committee released a draft of the Act. If you don’t want to comb through the 1600+ pages we’ve provided a summary below.
No surprise that many of the original provisions of the bill have been modified, altered or removed altogether. On the other hand, several new tax provisions have been added.
Provisions deleted or not included in the revised bill include:
- Increase in corporate income tax rate
- Increase in individual ordinary income tax rates
- Estate and grantor trust provisions
- Increase in capital gains and qualified dividend rates
- Limit on deduction of qualified business income for certain “high income” individuals
- Carried interest modifications
New tax provisions that have been added include:
- 5% surtax on individual taxpayer’s modified adjusted gross income (MAGI) in excess of $10 million and an additional 3% of MAGI in excess of $25 million, for a potential 8% surtax. For trusts and estates, the 5% and 3% surtax apply at $200,000 and $500,000, respectively.
- Imposes a 3.8% net investment income tax on trade or business income for individual taxpayers earning $400,000 ($500,000 if filing a joint return). This is a significant addition and will apply to a large number of taxpayers. This means the surtax would apply to active business income from whatever source.
- New limitation on the deduction of business losses to $250,000 per year or $500,000 for joint returns
- Limits the gain exclusion on sales of qualified small business stock to taxpayers with less than $400,000 gross income
- Includes a variety of green energy credits
- Advanced monthly payouts of child tax credit (as compared to the current advance payout of only half the credit)
The bill could include additional changes by the time it passes if it even passes. One of the biggest hold-ups for the Joint Committee on Taxation is the State and Local Tax (SALT) deduction currently capped at $10,000. An increase in the SALT deduction would probably be accompanied by an increase in the Alternative Minimum Tax.
Please contact your Dent Moses advisor or our office with questions or for more information.