Will 2022 Bring New Tax Law?

January 10, 2022 | Kristine A. Tidgren

Potential tax changes dominated most 2021 tax discussions. Proposals such as the American Families Plan sought to significantly increase the capital gains tax rate and require recognition of capital gain at death or at gift.  A later House of Representatives proposal sought to increase the capital gains tax rate and cut the estate and gift tax exemption in half in 2022.

Build Back Better Act

As passed by the House on November 19, 2021, the Build Back Better Act does not include these earlier proposals. The estimated $1.75 trillion bill proposes extending the enhanced child tax credit through 2022 and raising the SALT deduction limit from $10,000 to $80,000, along with a number of other social spending measures. With respect the tax increases, the BBB includes the following:

  • New surtax on multi-millionaires and billionaires
    • 5% Above $10 million in income, 3% above $25 million in income
    • Surtax impacts trusts and estates at income > $200,000
  • Limit IRA contributions once balances reach $10 million, accelerate RMDs
  • Restrict Roth conversions of after-tax contributions beginning in 2022 and prohibit those with income >$400,000 (single) / $425,000 (MFJ) from engaging in a Roth conversion from an IRA or employer-sponsored plan, beginning in 2022
  • Significantly limit the current exemption for Qualified Small Business Stock
  • Modify Net Investment Income Tax to include all business income for those making over $400,000 (singles) / $500,000 (MFJ)
  • Continue limitation on excess business losses permanently
  • 15% minimum tax on largest corporations ($1 billion or more in profit)
  • Increase the tax rates and make changes to Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII)

Will the BBB Pass?

Ten days into 2022, it appears increasingly unlikely that this scaled-down BBB will pass the Senate and become law. Senator Manchin has stood firm in asserting that he is concerned about the BBB’s possible contribution to inflation. He also says that the asserted price tag of $1.75 trillion is not accurate. He argues, for example, that those supporting its passage will want to extend the enhanced child tax credit beyond the one-year period proposed in the text. Extending the child tax credit enhancement alone for 10 years would cost an estimated $1.6 trillion.

Current Law Review

While nothing is off the table, it does not appear likely that those selling assets or dying in 2022 will face increased tax liability. 

Estate and Gift Tax Exemption

Current federal gift and estate tax law includes a “basic exclusion amount,” which is the combined value of property an individual can give away during lifetime and at death without incurring any tax liability.  In 2021, the basic exclusion amount was $11.7 million per individual.  Because this amount increases each year for inflation, this exclusion amount increased to $12.06 million in 2022. Absent congressional action, the basic exclusion amount will decrease to $5,000,000, plus an applicable inflation adjustment, in 2026. Portability allows spouses to share a combined basic exclusion amount, as long as the estate properly files a Form 706 at the death of the first spouse.

Each year an individual can gift the “annual exclusion amount” to another individual or organization without having to file a gift tax return or track the gift for gift and estate tax purposes. In 2021, the annual exclusion amount was $15,000 per person. In 2022, it has increased to $16,000 per person.

Taxation of Capital Gain

Under current law, taxpayers must pay a tax on gain from the sale of appreciated assets during their lifetime. This tax is calculated based upon whether the gain is short-term capital gain, which generally arises when the asset is held for one year or less, or long-term capital gain, which usually arises when the asset is held for more than one year. Current law affords a preferential rate schedule for long-term capital gain. Short-term capital gain is generally taxed as ordinary income. In either case, the gain is calculated based upon the difference between the owner’s basis (generally cost plus improvements) and the sales price. As shown in the chart below, the top long-term capital gains tax rate for 2022 is 20 percent.

Single Taxable Income

MFJ Taxable Income

Capital Gain Tax Rate










Present law also imposes a net investment income tax (NIIT) on the gain arising from the sale of investment assets. This 3.8 percent tax is imposed upon taxpayers with net investment income and modified adjusted gross income above the following threshold levels:

Filing Status

Threshold MAGI

Married filing jointly


Married filing separately




Head of household (with qualifying person)


Qualifying widow(er) with dependent child


Under current law, this tax does not apply to active business income or income from the sale of business assets.

Stay Tuned

We will keep you posted as developments unfold. With mid-term elections around the corner, 2022 is sure to be an interesting year.