New Tax Proposal Summary
The recent proposal from the Biden Administration has made headlines as a tax on the wealthy to help pay for the near $2.3 Trillion dollar infrastructure plan. While this is still just a proposal and many of the details remain fuzzy, we wanted to provide you with a summary of some of the changes that have been reported.
- The top individual federal income tax rate would rise from 37% to the pre-Trump rate of 39.6%.
- The income threshold is currently around $200,000 for individuals and $400,000 for Joint filers.
- Increase the corporate tax rate from 21% to 28%
- Taxes long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent on income above $1 million and eliminates step-up in basis for capital gains taxation.
- This is believed to be $1 million for joint filers
- Imposes additional social security taxes on wages or self-employment income over $400,000.
- The current wage cap of $137,700 would remain in place but those making more than $400,000 would pay additional tax into Social Security.
- The Biden proposal could expand the estate and gift tax by reducing the exemption amount to $3.5 million (per individual) and increasing the top rate for the estate tax to 45%. Biden would consider eliminating step-up in basis for inherited property.
- The current exemption is $11.7 million per individual or $23.4 per couple.
- Retain the current like-kind exchange rules for taxpayers earning less than $400,000. Taxpayers with income greater than $400,000 will be ineligible for capital gains deferral.
- This would eliminate the current 1031 exchange for those making over $400,000.
Keep in mind that this is still all a proposal with the final details still no worked out. We will continue to keep you updated as more details are released as well as provide planning opportunities should they arise.
If you have any questions, feel free to give us a call at 610-825-3540.