Passed by the House, Reconciliation Bill Moves on to the Senate
- Nov 22, 2021
On November 19, the House of Representatives approved (by a 220-213 vote) its version of the Biden Administration’s “Build Back Better” social infrastructure initiative. This roughly $2 trillion reconciliation legislation will now be considered by the Senate, where significant changes are likely to be made, including to the tax provisions. Whether the legislation will ultimately be adopted by Congress, and if so, in what form, remains unclear.
The tax provisions contained in the Build Back Better bill are substantially the same as we reported in our November 3, 2021 alert, with the following material changes –
- The existing $10,000 cap ($5,000 for married individuals filing separately) on the itemized deduction for state and local income and property taxes would be increased to $80,000 ($40,000 in the case of an estate, trust or married individual filing separately). This higher limitation would apply to taxable years beginning after December 31, 2020 and before January 1, 2031. The cap would revert back to $10,000 in 2031. Note: amongst the many tax provisions contained in the legislation, this may prove to be the most contentious in the Senate’s deliberations.
- A number of retirement plan provisions that had been in the original House Ways and Means Committee proposal but later dropped have been reinstated in the House passed version. These relate to: (i) the contribution limit for individual retirement plans of high-income taxpayers with large account balances; (ii) an increase in minimum required distributions for high-income taxpayers with large retirement account balances; (iii) the tax treatment of rollovers to Roth IRAs (to close so-called “back-door” Roth IRA strategies); and (iv) the treatment of IRA owners as disqualified persons for purposes of prohibited transaction rules.
EisnerAmper will continue to keep you informed on this important tax legislation as developments warrant.
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Richard J. Shapiro
Richard Shapiro, Tax Director and member of EisnerAmper Financial Services Group, has more than 40 years' experience in federal income taxation, including the taxation of financial instruments and transactions, both domestic and international.
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