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Biden's Tax Plan

Updated: Feb 3

April 22, 2021

Biden announced today his plans to fund his trillion-dollar infrastructure plan. Essentially to garner more of the US taxpayer money by increasing taxes: capital gains for the wealthy, corporate ("C-Corps") to upping estate taxes.

Capital Gains Tax Rate has incented investors to have US investments over a period of time. Just as one would expect to receive a qualified dividend from holding a long-term position in a particular US company, one would typically expect to receive favorable treatment when they decided to sell. Biden denounced that notion today by fulfilling his campaign promise to pay for his unprecedented infrastructure bill.

If you owned an investment (not a personal-use asset, e.g., your home, car, etc.) for more than 12 months, you experienced a favorable tax treatment when sold. The cap for long-term gains was sealed at 20%, plus 3.8% for net investment income tax for the wealthy folks.

If Biden’s Proposal is approved, does that mean Capital Gains Tax Rate could change in 2021?

Yes, if you earn more than a million

The new tax rate for the ‘wealthy’ will be nearly double, from 2020 tax rate of 20%.

All investments sold, regardless of holding period,

will be taxed at 39.6% plus the Net Investment Income Tax of 3.8%

for a grand total of 43.4%

Also, the lifetime estate exemption may decrease by half

($11.6mm down to $7mm)

& the hike on taxes on corporations.

If these folks were to consider donating these appreciated assets to charity, or decide to fund a trust for their grand- &/or children, used a qualified retirement account, or even formed a “S-Corp” then these wouldn’t be their concerns.

#valueoffinancialplanning #cfp #ea #irs #taxplanning #smartfinancialhabits #taxstrategies #retirement

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