Skip to Content
View of U.S. Capitol building during the day.

Section 174 and Section 163(j) among key tax changes for 2022

January 26, 2022 / 11 min read

Several federal tax changes took effect on Jan. 1, 2022, which may require consideration prior to the first estimated tax payment dates of 2022. Our tax experts highlight some of these changes and what you should consider now.

As we began a new calendar year, several federal tax changes quietly took effect. During 2021, much of the tax focus was centered around the Build Back Better Act (BBBA), which remains on hold in Congress. However, other tax rules were already set to change based on existing law. Those changes will impact current year tax liabilities and will require consideration prior to the first estimated tax payment dates of 2022. Here are our thoughts on what these changes mean and what might be possible for tax legislation during 2022. 

What tax rules changed on January 1, 2022?

The federal tax changes for 2022 come from a variety of sources. Those include changes created by the Tax Cuts and Jobs Act (TCJA) with delayed effective dates, the expiration of many COVID-19 pandemic-related programs, and new types of tax reporting.

Will we see other tax changes during 2022?

The short answer is that the path forward for new tax changes is currently uncertain. The BBBA would make significant changes to existing tax rules, if enacted. However, on Dec. 19, 2021, Senator Joe Manchin announced that he “cannot vote to continue” with that bill. Since the Senate is evenly divided, and the BBBA doesn’t have bipartisan support, a “no” vote from even one Democratic senator prevents passage of the bill. In the weeks that followed Senator Manchin’s announcement, Democratic leadership indicated that negotiations on the BBBA would continue, although there have been few concrete developments beyond public statements. These developments stalled the BBBA and raise many questions about whether there is a path forward and what tax changes would be included in the bill if it does advance.

It’s also possible for Congress to change tax rules during 2022 through legislation outside of the BBBA. One category to watch is taxpayer-favorable changes included in the BBBA that might have broader support in Congress (e.g., Sec. 174 modifications). A second category includes enhancements to tax rules that would address perceived gaps in existing law. Many of the proposals in the BBBA outside of the headline items would fall into this second category. Congress might also utilize tax changes to support businesses and individuals in response to either lingering challenges of the COVID-19 pandemic or broader economic concerns. Finally, Congress could alter rules that are set to change or expire on their own.

Tax changes advancing outside of the BBBA would likely be less sweeping in their scope and would instead impact more targeted types of taxpayers in either favorable or unfavorable ways. The process for any of these changes might also be subject to an elongated process, potentially being held until after the 2022 midterm elections. As the year unfolds, taxpayers should continue to monitor potential tax legislation, but the likelihood of significant changes become less likely with each passing day.

Key takeaways

Tax rules have been continually modified throughout recent years, so it has been challenging to keep up to date with the current law. The changes that have so far taken effect for 2022 involve rules that have been known for months or years ahead of time. However, the general theme of these changes is a reduction in the available tax deductions for businesses and individuals. Ultimately, this means that taxable income projections will require greater scrutiny for both estimated payments during the year and the timing of when affected tax returns are filed. Sec. 174 is expected to demand the most attention given the work necessary to track expenses and apply the new capitalization and amortization rules. Throughout the coming year, taxpayers should keep these tax changes in mind so they can proactively plan for the impact to their 2022 tax position. Our experts can assist taxpayers in understanding the impact of these changes and develop a plan that makes sense for taxpayers and their businesses.

Related Thinking

Business professional sitting in an office using a high-end laptop.
Aug. 25, 2021

Section 174 research expenses: What’s changing and what are my next steps?

Webinar 1 hour watch
Two business professionals walking next to a building with big marble columns.
December 17, 2021

Senate releases Build Back Better Act tax changes as progress slows

Article 31 min read
Adult using laptop
November 11, 2021

Infrastructure Act accelerates expiration of employee retention credit

Article 3 min read