Biden’s Build Back Better bill has, as expected, passed through the House last month. We have seen that many of the changes we saw in the original bill have been dropped as it progresses through the stages, although there are still several proposals affecting both domestic and international US taxpayers. There is still a way to go, with some members of the Senate continuing to oppose some of the changes.

We see many proposed tax reforms sweep across corporation and individual tax, including those international taxpayers. Whilst there have been changes and omissions since the original proposal, the more important topics to consider for international individuals are highlighted below:

  • The latest framework lacks the change in base tax rates, meaning the proposed 5 percent increase to long-term capital gains and qualified dividends has been dropped.
    However, for ultra-high net worth individuals, the surcharges remain in the bill, over the filing status dependent thresholds.  NRAs with US sourced employment income, or income connected to the US are also included in this.
  • The Net Investment Income Tax (‘NIIT’) currently only applies to passive investment income above $250k, though the provisions suggest this is to be expanded to trade or business income of high income individuals, as well as trusts & estates.
  • Foreign tax credit changes are an area of concern, particularly for those non-resident US individuals, and the proposals haven’t changed since originally written. The carryback and carryforward rules prove useful for many, and the proposed position to get rid of the carryback rule and reduce the number of years to carryforward is something that needs to be considered and planned for should the changes be approved.  We would be looking at this coming into effect after the tax year ending December 31, 2022.

This is not exhaustive, and any corporation tax or general US tax changes should be discussed with an advisor.

Of course, these proposals are not yet law and passing them through the Senate is looking like an uphill battle.  For individuals who could be affected by these changes, we should start planning now in preparation for some measures potentially applying to the tax year beginning January 1, 2022.

If you are a US citizen living abroad or have US sourced income that you feel would be affected by the above, please do get in touch to discuss with our US private client tax team. 

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