“Build Back Better” Tax Plan Update

Yesterday afternoon, the newest version of the “Build Back Better” Tax Plan was released. While this is only a proposal it is worth noting that there are several major changes from the version of the bill released in September.

Missing from the new bill are:

  • Proposed lowering of the gift and estate tax exemption amounts (These are currently set to lower in 2026)
  • Limitations on grantor trusts
  • Increased capital gains rates
  • Limitations on IRA / Roth IRAs

Of course, if they remove some of the previously proposed taxes. Congress will have to come up with other ways to fund the bill.

Some of the most prominent changes include:

  • Increasing IRS enforcement
  • 15% minimum tax on corporations with more than $1 billion in profits
  • 1% surcharge on corporate tax stock buybacks (applicable only to publicly traded companies)
  • Income surtax of 5% for Modified Adjusted Gross Income (MAGI) over $10 million + an additional 3% for MAGI over $25 million
    • While most people will not be impacted by this surtax. The sale of a business could push someone’s income high enough to trigger the additional taxes.
  • Income surtax for trusts starting of 5% for MAGI overs $200,000 + an additional 3% for MAGI over $500,000
  • Expansion of 3.8% net investment income tax to business profits for material participants making over $400,000 ($500,000 for joint filers) and all trusts and estate regardless of income levels
    • This would likely impact S-Corp owners the most.

Even though these proposed changes may have some people breathing a sigh of relief as it appears to give some time for additional planning. I would caution you from believing that the estate tax exemption and limitations on grantor trusts are completely off the table. If you are already engaged in planning for the potential law changes is probably prudent for them to continue moving forward with those changes, depending on your specific circumstances and goals.

If you have questions on the newest proposal and how it might impact you, please contact your Oakworth Client Advisors

This document is being provided for informational and educational purposes and is not meant to be taken as specific advice. Oakworth Capital Bank does not provide tax or legal advice. All decisions regarding the tax and / or legal implications of these strategies should be discussed with your tax and / or legal advisors before being implemented.