President Joe Biden will propose almost doubling the capital gains tax rate for some individuals to 39.6% when he outlines the American Families Plan in a joint address to Congress on April 28, 2021.
For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for some investors could be as high as 43.4%. The new marginal 39.6% rate would be an increase from the current base rate of 20%.
A 3.8% tax on investment income will remain. The combined taxes could push the tax rate on returns on financial assets higher than rates on some wage and salary income.
The capital gains increase is expected to raise $370 billion over a decade, according to an estimate from the Urban-Brookings Tax Policy Center based on Biden’s campaign platform. These taxes are slated to fund the $2.25 trillion infrastructure-focused “American Jobs Plan.”
For $1 million earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.
President Biden has also warned that those earning over $400,000 can expect to pay more in taxes.
For those that will be affect by these new tax rules, tax planning is more crucial than ever. E-mail us to set an appointment to review your tax plan.
