Early Version of Tax Reform Proposals
Ryan McDonell Manager, CPA
16 September 2021
Last week, the House Ways & Means Committee began discussions on legislative proposals for the Build Back Better Act. The proposals deal with a variety of topics including, for example: medical leave, automatic retirement plan enrollment, Medicare expansion, access to child care, infrastructure, green energy initiatives, tax credits, and tax increases.
The list below highlights some of the standout tax proposals being discussed. Congress is still in the early stages of the legislative process. While the House Ways & Means Committee has already advanced its proposals, the Senate Finance Committee is set to offer its own set of proposals, and both chambers of Congress will also look to coordinate with the Biden administration’s goals.
The items below will very likely change before any proposals are signed into law, if at all. Expect that any version signed into law will be different from the listing below.
- C corporation tax rate changes from flat 21% to graduated structure with top rate of 26.5%, and additional tax on taxable income over $10M
- Individual top tax rate changes from 37% to 39.6%, and taxpayers reach the top tax bracket sooner
- Capital gain top tax rate increases from 20% to 25%, effective for gains after September 13, 2021
- Net investment income tax 3.8% will apply to income from businesses in which certain taxpayers materially participate
- Surcharge tax of 3% for individuals on adjusted gross income over $5,000,000
- Estate/gift tax exemption reduced to $5,000,000 adjusted for inflation, down from the current $10,000,000 base exemption
- IRA limitations for high-income taxpayers affecting contributions, RMDs, types of investments, and Roth conversions
- Extends recent enhancements to various tax credits including child tax credit, child and dependent care credit, and earned income tax credit
- Enhances various tax credits including work opportunity credit, rehabilitation tax credit, and several energy credits
A more detailed summary of the tax increase provisions from the House Ways & Means Committee is available here.