There have been a number of changes to tax laws over the last several years. Understanding the history behind the changes helps us better understand how we got where we are today and where things may go from here. The following is a brief list of the history of tax law changes from 2017 to present.
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2022 Tax Updates
Secure 2.0 Retirement Changes - December 29, 2022
President Biden signed a bill that included many tax-related retirement changes. There was a substantial increase to catch-up contributions for individuals over 50. It also increased the required minimum distribution age from 72 to 73. Tax credits for employers opening new retirement plans for their employees increased to up to 100% of the cost of the plan for businesses with less than 50 employees.
Inflation Reduction Act - Energy Credit & Other Tax Changes - August 16, 2022
President Biden passed the Inflation Reduction Act as a compromise to the Build Back Better agenda that didn’t make it through the senate. This act included many changes to energy tax credits. These include electric vehicle credit changes, energy efficient home tax credits, and many incentives for businesses to adopt more green energy through tax credits.
This act also included a major change to taxes on large corporations. Corporations making over $1 billion in net income for GAAP purposes would be required to pay a 15% minimum tax. It also included a 1% excise tax on stock repurchases for certain companies.
2021 Tax Updates
Infrastructure Bill - Crypto Reporting & ERC Changes - November 15, 2021
The infrastructure bill passed by the Biden administration changed two major items in the tax world. The first is that it delayed the updated cryptocurrency reporting guidelines to the 2023 tax year, meaning crypto exchanges were not required to issue 1099-B’s to the IRS or to taxpayers until then. The other critical change was the removal of eligibility for most companies to claim the employee retention credit in the 4th quarter of 2021.
Child Tax Credit Payments Start - July 1, 2021
The American Rescue Plan enacted an advanced payment of child tax credits to parents that claimed child tax credits in prior tax years. This allowed families with dependent children to receive half of their estimated child tax credit for the 2021 tax year from July – December of 2021. Ordinarily, this is calculated and claimed on a tax return filed after the tax year is over.
American Rescue Plan - March 11, 2021
Many tax changes were made as part of the American Rescue Plan passed by the Biden Administration. A retroactive change was made to the taxation of unemployment benefits, allowing the first $10,200 to be received tax-free for many taxpayers. This bill also included $1,400 non-taxable stimulus payments to eligible individuals. Aside from that, there were major increases to child tax credits, moving from $2,000 per child to $3,000, or even $3,600 per child under the age of 6 depending on your income. This came with an added bonus of an increase in dependent care tax credits available for families who pay for daycare.
Aside from individual changes, there were also many changes to business laws. This bill extended the employee retention tax credit, or ERC, through the end of 2021. It also extended sick leave credits for employees who test positive for COVID-19, allowing employers to claim a credit for 100% of the wages associated with sick leave pay. Finally, this bill opened a Restaurant Revitalization Fund, which provided tax-free assistance to restaurants with pandemic-related revenue declines.
2020 Tax Updates
Consolidated Appropriations Act - December 27, 2020
This was another pandemic-related bill that included many tax changes. The first is that it paid tax-free stimulus checks to individuals totaling $600 per individual. It also included an extension of the $300 above-the-line charitable deduction for individuals. It also eliminated the tuition and fees deduction for higher education, replacing it with more favorable constraints on the American Opportunity Credit and the Lifetime Learning Credit.
For businesses, this bill clarified that there would be no tax implications for PPP loan forgiveness received on either first or second draw PPP loans. This is also the bill that allowed for 2nd draw PPP loans to be taken for struggling businesses during the pandemic. Aside from this, major changes were made to employee retention credit laws as well as the 100% deduction for business meals.
CARES Act - March 27, 2020
This was the first pandemic-related response by Congress that involved tax laws and tax changes. This included the first round of $1,200 stimulus checks to individuals, allowed for early retirement withdrawals of up to $100,000 for many individuals, and added an above-the-line deduction of $300 for charitable contributions.
For businesses, this act made the first round of PPP loans available to struggling businesses. It also allowed employers to pay sick leave for anyone exposed to COVID-19. It also allowed many employers to defer paying social security taxes associated with the wages they paid to employees.
2018 Tax Updates
This bill extended many tax provisions that were set to expire. Some of these provisions included tax credits focenergy efficient property, the tuition and fees deduction, and opportunity zone investment incentives.
2017 Tax Updates
Tax Cuts and Jobs Act - December 27, 2017
This was one of the most sweeping changes to tax laws in modern history and was passed by the Trump administration. Many of the major changes are highlighted below.
Lowered Individual Income Tax Rates: The income range in each bracket increased, and the highest marginal tax rate was changed from 39.6% to 37%.
Child Tax Credit: The bill increased the child tax credit from $1,000 per child to $2,000 per child. It also increased the income phaseout threshold for claiming the credit.
Standard Deduction: The standard deduction increased from $12,000 per married couple to $24,000. It nearly doubled for single filers as well.
SALT Cap: The bill limited the amount of state and local income tax you could deduct on schedule A to $10,000.
Healthcare Mandate: The penalty for lack of healthcare coverage associated with Obamacare was repealed.
Estate Tax: The estate tax exemption was increased to $11.2 million for single filers and $22.4 million for joint filers, removing the death tax for the majority of Americans.
QBI Deduction: This bill added a 20% deduction for individuals that have pass-through business income from a qualified trade or business.
Corporate Tax Rates: The top corporate tax rate was 35% prior to the passage of this bill. After, the corporate tax rate was a flat 21%.
Bonus Depreciation: The 100% bonus depreciation available for businesses was extended through the year 2022.
Section 179 Increases: The section 179 depreciation available for business equipment was increased to $1 million for qualified property.