Overview of President Biden’s Tax Proposals for Individuals

President Biden’s outlined his proposals for individual taxpayers in an April 28th address to Congress and in an 18-page fact sheet released by the White House.  As expected, the “American Families Plan” includes a long list of significant tax increases, which are summarized below. 

  • The top marginal tax rate would increase from 37% to 39.6%, which was the highest tax rate before the 2017 Tax Cuts and Jobs Act took effect.
  • Long-term capital gains would be taxed at ordinary income rates, rather than the current maximum 20% rate, for “households making over $1 million.”
  • Basis step-ups at death would be limited to $1 million per individual ($2 million per couple), and the gains could be taxed if the property is not donated to charity.  The fact sheet states that this “will be designed with protections so that family-owned businesses and farms will not have to pay taxes when given to heirs who continue to run the business.”
  • Carried interests would be taxed as ordinary income instead of capital gains.
  • Section 1031 like-kind exchanges would be eliminated for gains greater than $500,000 on real estate exchanges.
  • Under Section 461(l), the excess business loss rules would be made permanent for individuals, which means that pass-through losses would be limited to $250,000 for single filers and $500,000 for joint filers.
  • The 3.8% net investment income tax would apply to all income above $400,000, including non-passive income.

Our Commitment to You

The American Families Plan includes numerous policies aimed at education and childcare and a $1.8 trillion price tag.  As the saying goes, there is no free lunch, and the tax changes listed above are designed to fund these proposed policies.  At ATKG, we understand that times of change and uncertainty can be worrisome, but they also present opportunities for meaningful tax planning.  Please contact your ATKG adviser with any questions or concerns.

Allison Miller is a Tax Partner for ATKG. She graduated Summa Cum Laude in 2009 from Texas A&M University with both bachelor’s and master’s degrees in accounting. When she joined ATKG in August of 2017, she came to us with nearly 10 years of public accounting experience from the Big Four.  Allison serves as the director of ATKG’s Federal Tax practice and has experience in real estate, farm and ranch, professional services, and restaurants.

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