6 Tax Breaks in Biden’s Construct Again Higher Invoice
Ron Adar / Shutterstock.com
After months of debate, the Democrat-controlled US House of Representatives passed the Build Back Better Act, which brings a significant portion of President Joe Biden’s agenda closer to reality.
However, the massive $ 1.7 trillion spending bill is still ongoing – it has to pass through the Senate, where it could see significant changes or stall. While enough dust has settled to study the impact on taxpayers, ongoing negotiations could change or nullify those potential savings.
But for now, here are several tax breaks that would be created or expanded by the newly passed version of the bill.
1. Extend the extended child tax credit
Monkey Business Pictures / Shutterstock.com
The American Rescue Plan Act of 2021, which went into effect in March, made significant but temporary changes to child tax credit, including:
- Credit increase up to $ 3,000 per Eligible Child 6-17 years of age and up to $ 3,600 for younger children
- Provision for eligible children who will turn 17 in 2021
- Allows many taxpayers to receive half of the estimated 2021 credit upfront
- So it’s fully recoverable for most taxpayers, meaning eligible families can get the full loan amount even if they don’t owe federal income tax
These changes are effective for the 2021 tax year. Should the Build Back Better Act become law in its current form, the changes would be extended to 2022. The eligibility for reimbursement would also become permanent.
2. Renew the extended income tax credit
Antonio Guillem / Shutterstock.com
Similarly, the American Rescue Plan Act made changes to Income Tax Credit (EITC) that include:
- No Dependent Employee Loan Increase To $ 1,502 (up from $ 538 in 2020)
- Extension of the qualifying age range for eligible employees between the ages of 25 and 64 to young adults (from 19 years of age) and senior citizens
- Extended entitlement to families with an investment income of up to $ 10,000, inflation-linked (up from $ 3,650 in 2020)
The version of the Build Back Better Act passed by the House would extend these changes until 2022.
3. Increase state and local tax deduction
Studio Romance / Shutterstock.com
Historically, state and local tax (SALT) deduction has been valuable to homeowners in states where property taxes can be relatively high. As we wrote in “12 Spendings You Could – But Shouldn’t” – Take As A Tax Deduction, this is no longer exactly the case because “the Tax Cuts and Jobs Act of 2017 chopped off that deduction on its knees”.
That bill capped the deduction to $ 10,000 a year through 2025. But the Build Back Better Act would make it more valuable again by increasing it up to $ 80,000 by 2031, reports The Tax Advisor.
But remember that the bill is not finalized. The SALT deduction change is “one of the most controversial aspects of the legislation” and is likely to be changed in the Senate, according to Bloomberg.
4. Expand the Bonus Tax Credit
zenstock / Shutterstock.com
The Build Back Better Act would expand (and increase the amount) of the Premium Tax Credit, a refundable credit designed to help lower-income households pay their health insurance premiums. These changes would last through 2025.
5. Create an electric vehicle tax credit
Viktoriia Hnatiuk / Shutterstock.com
The version of the Build Back Better Act passed by the House would create a refundable tax credit of up to $ 8,500 for those purchasing new qualified plug-in electric vehicles that cost up to $ 80,000.
A smaller loan would be available to buy used electric vehicles. The invoice also includes credit towards the purchase of certain new electric bikes.
6. Extend the energy efficient home tax credit
bikeriderlondon / Shutterstock.com
Under current law, certain energy efficient building improvements are currently eligible for a tax credit. As we explain in “8 Federal Income Tax Breaks For Homeowners,” these renovations include:
- Solar power
- Solar water heater
- Geothermal heat pumps
- Small wind turbines
Currently, the credit is up to 26% of the cost of such upgrades and is available until 2023. The House Passed version of the Build Back Better Act would extend the credit until 2033 and refund the credit starting in 2024.
Disclosure: The information you read here is always objective. However, sometimes we get compensation when you click on links in our stories.