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Unfortunately, as we approach year end, we still find ourselves with an uncertain tax landscape for 2021 and beyond. Congress continues to debate the reconciliation bill (also called the Build Back Better bill). Having said that, here is what we know at this point:
Infrastructure bill
- Signed into law;
- Is not really a "tax bill" as it mainly addresses spending on a variety of infrastructure projects.
- However, it has 2 tax related aspects
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Employee Retention Credit (ERC) - retroactively ended ERC on 9/30/2021 rather than 12/31/2021 as originally legislated
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Crypto - requires broker reporting of crypto assets/transactions. As we have said before, if you are doing crypto expecting it to be tax free, you have false expectations. This will take a few years to implement but this new law will essentially have you getting "1099B type reporting" on crypto similar to stocks.
Build Back Better bill (BBB)
- Most "experts" expect this bill to be signed into law before Christmas.
- Although nothing is final until this is signed, here are a few key highlights of what's included and excluded in the bill as currently written
Included
- The deduction cap on SALT (state and local tax) increased from $10,000 to $80,000
- Expanded premium tax credit for health insurance
- 1 year extension on expanded child credit and permanent extension of refundability
- Extending expanded earned income credit
- High income surcharge (added 5% income tax for those over $10 million)
- 15% minimum tax on large corporations (over $1 billion in profits)
Excluded
- No increase in capital gains tax
- No increase in fixed corporate tax rate
- No increase in higher individual tax rates
- No increase in limitations on the 20% QBI deduction for small businesses
- Overall, I view most of these developments as positive for our client's tax position. However, as mentioned before, nothing included or excluded in BBB is final yet. As Congress continues to debate, filibuster and negotiate, anything can change. Given the politically charged landscape we live and some of the more controversial spending items included in the bill ("green" energy, expansion of Medicare and child care, etc.) you will likely see tradeoffs on some of the items noted above.
2021 Tax Planning
- We have begun the process of setting up meetings to discuss tax planning strategies before year end. If you are interested and have not been contacted, please reach out.
- We will be sending our our 2021 tax questionnaire - not all of you use this but please consider doing so as it makes sure we cover all key topics.
- The link below contains a useful document from the AICPA that gives some good update on 2021 and tax planning (most open on computer or tablet)
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