Article | Tax alert
Build Back Better – 2021 status
Dec. 20, 2021 · Authored by Paul Dillon and Michelle Hobbs
As you’ve no doubt heard over the weekend, Democratic Sen. Joe Manchin of West Virginia indicated that he “can’t get there” in regard to the Build Back Better (BBB) bill. Does this mean that BBB is dead?
In responding to Manchin’s statement, White House press secretary Jen Psaki said, “Just as Sen. Manchin reversed his position on Build Back Better this morning, we will continue to press him to see if he will reverse his position yet again, to honor his prior commitments and be true to his word.” She added, “[t]he fight for Build Back Better is too important to give up. We will find a way to move forward next year.”
Additionally, Senate Majority Leader Chuck Schumer has already committed to his Democratic colleagues to bring the bill to a floor vote early in 2022.
Summary and actions steps:
- BBB will not pass before the end of 2021, but expect a renewed effort to reach a compromise once Congress comes back from its holiday recess on Jan. 3.
- Due to logistical issues, even if BBB is revived in January or early February, it is doubtful that any state and local tax (SALT) cap change would remain retroactive to 2021. Therefore, if you can only itemize in 2021 because of an increased SALT cap (and will otherwise will be claiming the standard deduction), consider the following:
– Delay state tax payments until January to move any potential deduction into 2022
– Make payments of home mortgage interest on Jan. 3 (assuming no late payment penalty) to move the mortgage interest deduction into 2022 - Many provisions in the House-passed BBB Act would take effect on Jan. 1, 2022. If BBB is revived in early 2022, this date would likely hold. Consequently, this may mean taxpayers are subject to additional taxes and changed provisions for several months before the bill is enacted or even takes shape. While this is less than ideal, it’s not without precedent in recent tax legislations.
We encourage you to connect with your Baker Tilly advisor regarding how the above may affect your tax situation.
