Your guide to newly enacted – and proposed – changes to the tax code

Between the economic recovery from the pandemic and the new federal government, there have been many recent changes to the tax code that may have an impact on your financial plans. This page lays out articles explaining the tax changes that have already been enacted as well as proposals from the Biden administration that have not yet become law. 

What’s In and Out of the Latest Tax Proposals

Information accurate as of November 11, 2021.

Congress is continuing to debate the tax provisions of the Build Back Better Act, and when a final bill is passed we will provide a full review of the key provisions affecting taxpayers.  For now, some of the items included or excluded from the latest proposal:

Among the items currently on the table:
  • The $10,000 limit on the deduction for state and local taxes would be increased to $80,000 for 2021 through 2030.
  • The backdoor and mega-backdoor Roth conversion strategy would be prohibited beginning in 2022.
  • Roth conversions would no longer be allowed for couples with income over $450,000 or singles over $400,000, although this wouldn’t begin until 2032.
  • Beginning in 2022, a pair of new surcharges would apply to those with high levels of income, including a 5% tax on Modified Adjusted Gross Income over $10 million for most taxpayers, plus an additional 3% for those over $25 million. Levels adjust for married couples filing separately, trusts, and estates. 
  • Owners of retirement accounts worth more than $10 million in total would be subject to a Required Minimum Distribution equal to 50% of the amount over that threshold.  This would only apply to couples with income over $450,000 (singles over $400,000) and would begin in 2029.
Some items that are NOT included in the latest proposal:
  • Increases to the ordinary income and capital gain tax rates.
  • Prohibitions on certain types of investments inside IRAs.
  • Accelerated reduction to the estate tax exemption. 
  • Changes to the “step up in basis” rules.
  • Requirement for financial institutions to report account activity to the IRS.

Significant Changes That Have Already Been Enacted:

US Capital Building
Charitable Contributions

For 2020 and 2021 only, you can now deduct up to 100% of your adjusted gross income in qualified cash contributions (Consolidated Appropriations Act)

Older couple speaking with Financial Advisor
Delays in RMDs from IRAs

You can now wait to take RMDs until age 72, up from 70½   (SECURE Act)

Couple looking at documents
529 plan changes

The plan assets can now be used for student debts and siblings (SECURE Act)

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Child and Dependent Care Credits

Child tax credits and dependent care credits have both been increased and made fully refundable for 2021 (American Rescue Plan Act)

For help in sorting out how these changes may affect your financial situation, talk to your Baird Financial Advisor team.

Baird does not provide tax or legal advice. Please consult your legal or tax professional for specific information.

The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor, and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.

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