6 Tax Breaks in Biden’s Build Back Better Bill

President Joe Biden
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After months of debate, the Democratic-controlled U.S. House of Representatives has passed the Build Back Better Act, bringing a significant portion of President Joe Biden’s agenda closer to reality.

The $1.7 trillion spending bill remains a work in progress. However, it must be passed through the Senate. It could face significant changes or even fail. Although enough dust has settled, we can begin to look at the implications for taxpayers. However, ongoing negotiations could alter or erase these potential savings.

But for now, there are several tax cuts that the newly passed bill would create or extend.

1. Extend the expanded child tax credit

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The American Rescue Plan Act of 2021, signed into law in March, made significant but temporary changes to the child tax credit, including:

  • Increasing the amount of the credit to as much as $3,000 per qualifying child aged 6-17 and up to $3,600 for younger children
  • Making it available for qualifying children who turn age 17 in 2021
  • Allowing many taxpayers to receive half of the estimated 2021 credit in advance
  • Making it fully refundable for most taxpayers, meaning it is possible for eligible families to get the full credit amount even if they don’t owe any federal income tax

These changes are active for the 2021 tax year. If the Build Back Better Act becomes law as it’s currently written, the changes would be extended through 2022. Permanent refundability would also be possible.

2. Extend the expanded earned income tax credit

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Similarly, the American Rescue Plan Act made changes to the earned income tax credit (EITC) that included:

  • Increasing the maximum amount of the credit for workers with no dependents to $1,502 (up from $538 in 2020)
  • Expanding the qualifying age range for eligible workers from ages 25-64 to include young adults (age 19 and older) and seniors
  • Expanding eligibility to families with investment incomes of up to $10,000, indexed for inflation (up from $3,650 in 2020)

The House-passed version of the Build Back Better Act would extend these changes through 2022.

3. Increase the state and local tax deduction

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Historically, the state and local tax (SALT) deduction was a valuable one for homeowners in states where property taxes can be relatively high. As we wrote in “12 Expenses You May Be Tempted to Claim as Tax Deductions — but Shouldn’t”, that’s not exactly the case anymore because “the Tax Cuts and Jobs Act of 2017 chopped that deduction off at the knees.”

That law capped the deduction at $10,000 per year through 2025. But the Build Back Better Act would make it more valuable again, by raising it to as much as $80,000 through 2031, The Tax Advisor reports.

However, the bill is not a done deal. Bloomberg reports that the SALT deduction change is “one the most controversial aspects” of the bill and will likely be amended in the Senate.

4. Expand the premium tax credit

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The Build Back Better Act would expand eligibility for (and increase the amount of) the premium tax credit, a refundable credit that is designed to help lower-income households pay for their health insurance premiums. These changes would last through 2025.

5. Create an electric vehicle tax credit

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The House-passed version of the Build Back Better Act would establish a refundable tax credit of up to $8,500 for those who purchase new qualified plug-in electric vehicles that cost up to $80,000.

A smaller credit would be available to those who purchase used electric vehicles. A credit is also available for certain electric bikes.

6. Extend the tax credit for residential energy-efficient property

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Under existing law, certain home improvements that increase energy efficiency are currently eligible for a tax credit. As we explain in “8 Federal Income Tax Breaks for Homeowners,” these renovations include:

  • Solar electricity
  • Solar water heaters
  • Geothermal heat pumps
  • Small wind turbines

Currently, the credit is worth as much as 26% of the cost of such upgrades and is available through 2023. The House-passed version of the Build Back Better Act would extend the credit through 2033 and make the credit refundable starting in 2024.

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Brandon Ballenger,https://www.moneytalksnews.com/slideshows/6-tax-breaks-in-bidens-build-back-better-bill/

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