BBB is delayed... Now what?
The Build Back Better (BBB) Act will not be passed in 2021
As broadly reported, the lack of the required votes for passage meant voting on BBB did not - and will not - occur in 2021.
However, it is expected that there will be renewed efforts to reach a compromise when Congress returns from holiday recess on January 3.
Possible effect on personal itemized deductions of the increased SALT cap in BBB
The most recent version of BBB included an increase in the amount of allowable state and local tax (SALT) deductions – up from the current limitation of $10,000 to $80,000.
Assuming BBB passes in 2022 with at least some increase in the SALT deduction cap amount - and that the increase would not be effective retroactively to 2021 but only effective in 2022 - it is likely that some individuals who otherwise claim the standard deduction may be able to itemize deductions in 2022.
For potentially affected taxpayers, the following action should be considered:
- Delay state and local estimated tax payments until January 2022
- Make payment of home mortgage interest until January 3, 2022 – if no late penalty applies – to shift that mortgage interest deduction to 2022
- Possibly make “end of year” charitable contributions in early 2022 rather than December 2021
BBB – as currently proposed – includes several provisions that will likely have significant tax impact on many clients if ultimately passed. Therefore, like the suggestions in this tax alert, there may be other planning considerations leading up the potential passage of the bill.
We will continue to provide timely updates regarding this important legislation, and we encourage you to reach out to your Herbein tax consultant if you have questions.
For additional information contact us at email@example.com.