In Biden’s first congressional address, President Biden called for massive government spending including $2.3 trillion in infrastructure and $1.8 trillion in family and education programs. Of course, tax hikes follow significant federal spending. During this Intelligent Money Moment, we break down the facts and impact of this new proposal while offering some practical planning ideas in response.
- Currently, ordinary income such as wages or business profits is taxed at a top rate of around 41% and capital gains have a top rate of around 24% when you factor in potential payroll or investment taxes.
- This week, President Biden will meet with Congress to outline a plan to help pay for several social programs
- Details of the plan are being worked out, but the plan could cost more than $1T with funding for child care, paid leave, universal pre-kindergarten education and tuition-free community college.
- The plan may alter a tax provision that lets investors avoid capital-gains taxes on appreciated assets if they hold them until they die. Mr. Biden’s plan is to have gains on appreciated assets be taxed at the date of death (regardless of whether they are actually sold).
- The plan could increase the top capital gains rates on taxable investors at the top of the income scale.
- Republicans argue that stock prices and investments could suffer, especially as these changes could come atop corporate tax increases President Biden has proposed to pay for infrastructure spending.
- With a 50-50 Senate and closely divided House, moderate democrats may have a significant say in the tax proposals.
- If you are a high-net-worth individual in the top tax bracket or approaching, the recent news may impact you the most, and likely to provide tax planning strategies to perhaps spread out some of your long-term-capital gains in years when your low-earning years before Social Security benefits kick in.
- If you have a taxable account (revocable trust, or large taxable brokerage account), you may want to consider a gifting strategy depending on your current tax bracket and time horizon and other factors.
- As a CPA, tax efficiency has been a bedrock of Intelligent Investing and historically has been one of the biggest levers of value creation.
- If you’d like to learn more, please visit investedwithyou.com and click on the “Get Started” button to become the next Intelligent Investor.