Biden’s Build Back Better Act

Many may be concerned about the changes in the new taxes under the $1.75 trillion Build Back Better Act, which is President Joe Biden’s signature social safety net and climate change bill.  It has received a procedural vote in the House and still needs a final vote before it heads back to the U.S. Senate. 

The analysis from the non-partisan Congressional Budget Office indicating the ultimate cost of this bill will be the determining factor.  This article reviews the proposals as of Nov 6 and may at least can give us some guidance and potential financial planning ideas. The CERTIFIED FINANCIAL PLANNER™ professionals at Charleston’s Morris Financial Concepts, Inc are studying these proposals and our fee only financial planners are prepared to help you navigate these choppy waters.

With Biden’s Build Back Better Act, little change is in store for many taxpayers. The first thing that needs to be remembered is that if your taxable income is below $450,000 for married filing jointly (MFJ) or $400,000 for single (S) taxpayers, the proposed new tax laws have very few changes. The only significant marginal tax bracket change is that the 35% tax bracket has been reduced in its range since the return of the 39.6% rate begins at $450,000. This level of $400,000 (S) and $450,000 (MFJ) makes it so that the majority of taxpayers are not affected by the increase in rates.

No changes in rate for most with dividends and long-term capital gains. Dividends and long-term capital gains rates do not change from current rates for taxpayers making less than $450,000. Above $450,000, the rates go from 15% to 25%. This eliminates the current 20% rate.

Keep your eyes open.  There are some other items that taxpayers should be aware of and keep their eyes on for tax and financial planning purposes with the Build Back Better Act:

  • State and Local Tax Deduction (SALT) – Cap increased to $80,000 for the years 2021 to 2030, then reverts back to $10,000 in 2031.
  • Child Tax Credit extends into 2022 phasing out the higher credit amount for families with Adjusted Gross Income (AGI) >$112,000 for single (S) or $150,000 for married filing jointly (MFJ)
  • No IRA contributions can be made if taxable income > $400,000 for single (S) or $450,000 for married filing jointly (MFJ) and if your total qualified plan balances > $10,000,000.
  • No ROTH conversions if taxable income > $400,000 for S or $450,000 for MFJ
  • Business surtax of 3.8% of S-corp income with Modified Adjusted Gross income (MAGI) $400,000 for S or $500,000 for MFJ
  • Qualified Business Income (QBI) deduction would be capped at $400,000 S and $500,000 MFJ
  • Adding or improving tax breaks for green energy and energy efficiency
    • Credit jumps from 10% to 30% for nonbusiness energy property for your home and for residential energy efficiency property – solar, wind, geothermal, or fuel cell technology.
    • Creating 30% tax credit for qualified wildfire mitigation
    • Up to $12,500 for purchase of a new plug-in motor vehicle and $4000 for the purchase of a used plug-in electric vehicle.
  • A surtax on millionaire taxpayers equal to 5% with MAGI from $10,000,000 to $25,000.000 and then 8% for above $25,000,000
  • Increasing the Net Investment Income (NII) surtax to 3.8%. NII includes but is not limited to interest, dividends, passive rents, annuities, and royalties for MAGI>$200,000 S or $250,000 for MFJ
  • Improving Earned Income Tax Credits for 2022 by lowering the minimum age to 19 and eliminating the maximum age limit, increasing the maximum credit, and expanding the eligibility rules for former foster youth and homeless youth
  • Adding tax breaks for education – for example, no income tax on federal Pell grants

There are a lot of changes with the Build Back Better Act. The bulk of these changes that are considered detrimental to the taxpayer are for those taxpayers with taxable income >$400,000 Single (S) and $450,000 Married Filing Jointly (MFJ). If you’re in that category, Morris Financial Concepts, Inc has CERTIFIED FINANCIAL PLANNER™ professionals, a CPA, and Enrolled Agents to practice before the IRS who can help you become more familiar with the rules that are going to affect your situation.

If you are a closely held business, there are issues that also should be considered and potentially planned for now. Get your business finances in order and get with your financial advisor. The financial planning and tax professionals at Morris Financial Concepts, Inc are also knowledgeable about these business entities and the potential effects of these proposals.

If you have other targeted areas of these potential law changes with children, education, energy credits, etc. you should also start considering your situation. At least ask the questions. Your financial advisor must digest a lot of this information, and a good question that is relevant will help them focus and learn more also.

The tax ramifications are comprehensive and complicated. For most taxpayers, the changes aren’t going to be in tax bracket rates. They will be in other areas such as child credits, plug-in vehicle credit, or earned income tax credits. For business owners and investment heavy taxpayers, more guidance and facts are needed.   This is a lot to digest. Now is the time to review your financial situation and see if there are financial planning techniques that can benefit you. Contact us today.

Respectfully, Kyra Hollowell Morris, CFP®, EA




The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. MFC relies on information from various sources believed to be reliable, including third parties, but cannot guarantee the accuracy and completeness of any third-party information. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. Certified Financial PlannersTM (CFP®) are licensed by the CFP® Board to use the CFP® mark. CFP® certification requirements include: Bachelor’s degree from an accredited college or university, completion of the financial planning education requirements set by the CFP® Board (, successful completion of the CFP® Certification Exam, comprised of two three-hour sessions, experience requirement: 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of Apprenticeship experience that meets additional requirements, successfully pass the Candidate Fitness Standards and background check, agree annually to be bound by CFP® Board’s Standards of Professional Conduct, and complete 30 hours of continuing education every two years, including two hours on the Code of Ethics and Standards of Professional Conduct. MFC-21-14.