What Isn’t In The House’s BBB Legislation

On November 19, 2021 the US House of Representatives passed the long-awaited $2 trillion Build Back Better (BBB) Act.  Perhaps the most-discussed legislation of 2021, the bill contains what remains of the original $3.5 trillion proposal that was unveiled earlier this year.  Throughout the year, taxpayers have been fearing many of the provisions proposed in the plan. However, many tax provisions that were originally discussed did not make it past the House’s final cut. 

For instance, as late as September, we were expecting the highest individual tax bracket would be increased to 39.6% for those with taxable incomes over $400,000.  The rate on long-term capital gains and qualified dividends was also expected to increase, first to a maximum of 39.6% and then to 25%.  However neither provision is in the final House bill. 

President Biden proposed capping itemized deductions at a 28% tax rate and phasing them out completely for those with incomes over $400,000.  Neither of these proposals are in the final bill.  In fact, the final bill raises the maximum state and local tax deduction from $10,000 to $80,000. 

Corporate tax rates were also to be on the rise.  The current 21% tax rate was almost certain to be raised to 28%.  But, like the other provisions, this was not in the bill. 

The estate tax was not immune from the discussion.  President Biden’s original proposal to reduce the current estate tax exemption from $11.7 million to $3.5 million is not in the bill.  Neither are the proposals to eliminate the basis step-up for assets over $1 million and to tax non-recognized capital gains at death. 

Of course, the bill has a long road ahead of it, as the Senate’s version is almost certain to be different, meaning we don’t really know what will be in a new law, assuming it is passed at all.  As for now, those who were concerned about the original proposals can breathe a sigh of relief. 

Contributed By: Mark Westerhausen, MST, CPA | Director of Tax Services | DWD CPAs & Advisors