Build Back Better Act
The Build Back Better Act has passed in the House and is currently being debated over in the Senate. Below are some highlights from the Act that we are closely monitoring:
- One year extension of expanded child tax credit – The changes to the tax credit enacted by the American Rescue Plan Act for 2021 would be extended through 2022. As it stands right now this would also include the requirement that the IRS make advance payments for the credit throughout 2022.
- Expansion of wash sales – Wash sales would now apply to commodities, foreign currencies and cryptoassets. Previously, wash sales only included securities.
- Expansion of Net Investment Income Tax – 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 $250,000 (married taxpayers filing separately) will be subject to net investment income tax (3.8%). This includes income from passthrough businesses.
- Electric Motor Vehicles – The bill provides for a refundable income tax credit of up to $8,500 for new qualified plug-in electric motor vehicles. The credit is for qualified vehicles that cost up to $80,00 (for vans, SUVs and trucks) or $55,000 (for other vehicles). The credit is phased out for taxpayers with AGI over $500,000 (married filing jointly) or $250,000 (single taxpayers).
- Limitation of ROTH Accounts – The bill would prohibit all employee after-tax contributions in qualified plans and after-tax IRA contributions from being converted to a Roth IRA regardless of income level. This would be effective for distributions, transfers and contributions made after December 31, 2021.
The bill will have changes if/when it passes through the Senate. We will keep you updated as things progress. Should you have questions or concerns, please do not hesitate to contact one of our trusted tax advisors.