Included in this post is a detailed article from the leading tax industry company Wolters Kluwer. This post will go over the most important topics within the article, but take a moment to review the full article for a more in-depth analysis of this bill.
On November 19th, 2021 our government passed a massive $1.75 trillion bill, which is funded by the taxpayers (you) who make up this country. My goal is to try and inform each of you how your hard earned tax money is being spent.
Business Provisons
Corporate Alternative Minimum Tax
In 2018 our former president Trump introduced and signed the Tax Cuts and Jobs Act. One of the provisions within this bill was the elimiation of the Alternative Minimum Tax (AMT) for corporations.
Unfortionally, the Build Back Better Act re-instates this "secondary" tier of taxes for the Corporations (Form 1120). Essentially, this "modified" AMT goes into affect in 2021 and imposes an additional 15% tax, on top of the ordinary tax rate, on corporations who has an average annual adjusted financial statement income in excess of $1 billion over the last 3 years.
Individual Provisions
Income Tax Surcharge
This new surcharge is similar to the AMT but more complex! As if the system is not complex as it is!
This new surcharge is a two-stage tax on modified adjusted gross income (AGI) of individuals, esates, and trusts. The first tier is equal to a 5% tax on individuals whos MAGI is in excess of $10 million dollars. The second tier is an additional 3% tax on individuals hows MAGI is in excess of $25 milliona dollars.
This new "surcharge" begins to be effective starting in the 2022 tax year.
Individual Credits
SALT Deduction
This is the most important change to the new tax year. Currently in 2021 the governmet has limited your state and local income tax deduction (on Schedule A - Itemized Deductions) to $10,000. Thus, any taxpayer who has higher levels of income is very limited on their state taxes paid in deduction.
This bill now increases your $10,000 threshold to $80,000! Thus, it is much more likely for individuals with large SALT expenses to be eligible to deduce these write-off in full.
Energy Credits
The bill also favors many additional types of incentivies for taxpayers to invest in more energy efficient assets. The bill introduces a number of additonal tax credit programs. Go ahead and open the link to view the additional benefits.
If you have any questions on these additional provisions please contact Cory @ Marlow Accounting. We work hard to answer your questions with honest and accurate information.
Full Article - Click Below
Cory Marlow
Founder | Executive Accountant
Marlow Accounting
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