President Joe Biden’s Build Back Better package of social and environmental spending passed the House of Representatives on Friday, and the $1.7 trillion bill contains a number of provisions that could affect your pocketbook.
- The Build Back Better bill, if passed in its current form, would extend some of this year’s biggest tax code changes and create new ones.
- The bill would subsidize child care and create a universal preschool program for 3- and 4-year-olds.
- Among the major provisions: The child tax credit expansion would last another year, and a change that lets low-income families claim the credit would be made permanent.
While the bill isn’t a done deal yet—it could still be modified, delayed, or defeated in the Senate, where the Democrats hold the slimmest possible advantage—here’s a look at how it could impact your finances if enacted in its current form:
- Child tax credit expansion: This year’s expanded child tax credit would be extended for another year. The expansion increased its maximum value to $3,600 per child from $2,000 and started delivering it in advance monthly payments of up to $300 per child. The credit would permanently be made fully refundable, meaning that, just like this year, people could get the full value of the credit even if they didn’t earn enough to have it deducted from taxes they owed. One change from this year: Only families earning less than $150,000 (or individuals making under $75,000) would automatically receive the credit in advance monthly payments.
- Child care subsidies: Families making under 2.5 times their state’s median household income would have to pay no more than 7% of their income toward child care, with a federal subsidy picking up the rest, after a three-year phase-in period. Families making under 75% of the state median income would get free child care. To qualify, an adult in the house would have to be engaged in an activity such as work, school, or job training, or be receiving medical treatment for a disability.
- Free universal preschool: The federal government would create a free universal preschool program for 3- and 4-year-olds, starting with vulnerable communities and later extending to cover entire states.
- Health care subsidies: The increased federal subsidies for Obamacare plans, which have made health insurance more affordable even for higher-income earners, would be extended through 2025.
- Paid family leave: Creates a federal paid family leave program entitling employees to up to four weeks of family leave if they meet certain work requirements and aren’t otherwise covered by state or employer-provided programs.
- Earned income tax credit expansion: Makes permanent this year’s tripling of how much low-income childless workers can claim from the earned income tax credit, raising the maximum benefit from $543 to $1,502.
- Tax break for high-income earners: Households could deduct up to $72,500 in state and local taxes from their federal taxes, up from $10,000, retroactive to 2021 taxes—a measure that would overwhelmingly benefit those making more than $200,000 a year, according to an analysis by the Committee for a Responsible Federal Budget, an anti-deficit think tank.
- Reducing prescription drug costs: Drive down the cost of prescription drugs by allowing Medicare to negotiate with drugmakers over price, starting in 2025. Ten drugs (plus insulin) would be on the table the first year, growing to 20 by 2028.
- Hearing coverage for Medicare: Seniors would be able to get hearing aids and services through Medicare.
- Green energy tax credits: A slew of green energy tax credits for businesses and individuals, including a credit of up to $12,500 for buying an American union-made electric car.
- Raising taxes for the wealthy and corporations: While the bill includes tax breaks for middle-income families, it does the opposite for corporations and the ultra-wealthy, creating a 15% minimum tax on the profits of big companies and imposing a 5% surtax on people making over $10 million a year. It also gives the IRS funding to crack down on tax evasion.
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