Important Financial Changes to Consider From the Build Back Better Act

By Tanner Doudna

Update: As of 12/21/2021, this bill has been tabled until January 2022 at the earliest.

The Biden Administration is currently working to pass the Build Back Better Act.  There have been many changes to the bill since it was first introduced, but it is important to understand the likely changes that impact you and your financial strategy.

Note: As of this writing, the bill is not finalized, and I will update this newsletter with any changes that may be relevant once it’s finalized and signed into law.

Here’s some of the likely changes to the tax law:

• A one-year extension to the expanded child tax credit: This part of the proposed bill would make the child tax credit fully refundable for another year and will keep the credits the same ($3,600 per year per child for children ages 0-5 and $3,000 per year per child for children ages 6-17) as they are now.
• Back Door Roth Elimination: This part would eliminate the use of a back-door Roth contribution starting in 2022, as well as the “Mega back-door Roth” for those with a post-tax option available in their employer sponsored plan.
• Roth Conversion Limitations: This part of the bill would eliminate the ability to do Roth conversions for joint households whose taxable income is over $450,000, but it would not take effect until 2032.
• SALT Deduction Cap: There’s currently a $10,000 cap on how much of your state and local taxes (including real estate taxes) you can deduct. Under the proposed bill, that cap would be greatly increased. The exact number has varied as the bill has taken shape, but the new higher cap would probably be high enough for most readers to deduct all of their state and local taxes.
• Green Energy Incentives: The bill increases incentives for green energy improvements like solar power systems, electric vehicles, and even electric bicycles.
• Medicare Expansion: If passed, Medicare would begin covering certain hearing services for a specific group of seniors. 
• High-Income Surcharge: While this is likely not relevant to you and I, it’s interesting to see the proposed 5% tax on any AGI over $10 million per year for joint filers and another 3% on any AGI over $25 million per year.

We are here to help you as laws/markets/times change and will continue to help you find ways to maximize your finances.