![]() ![]() ![]() Accordingly, any legislation will likely be passed on party-line votes. As of the date of this writing, a bi-partisan revenue-raising bill appears highly unlikely. The guidance is merely a legislative proposal that needs to be enacted by Congress. The guidance came in the form of the General Explanations of the Administration’s Fiscal Year 2022, also informally known as the “Green Book.” The Green Book is located here. Note, however, that proposal also calls for an increase in ordinary income rates to a top rate of 39.6%. As a reminder, the proposal calls for taxing long-term capital gains at ordinary income rates for high-income individuals and trusts (40.8% being the highest capital gains rate with a 37% income tax rate and the 3.8% net investment income tax). Under the proposal, a new capital gain rate would apply to capital gains recognized after the date of the proposal. Original Post - The Biden Administration released further information about its plans for changes to the capital gain rate. The bill also omits the so-call “SALT repeal” and leaves in place the limitations on the deductibility of state and local taxes. The bill will be the basis for reconciliation between the House and Senate. Whether this proposal passes remains an open question. Prior to Septem(includes binding written contracts entered into before this date for gain recognized in 2021) The chart assumes a sale of stock by an individual with modified adjusted gross income over the high income threshold. Under this proposal, there still would be an advantage of closing transactions in 2021, as 2021 gain avoids the 3% surtax. ![]() A transition rule would protect gain recognized in 2021 that arise from transactions entered into prior to Septempursuant to binding written contracts. Once fully implemented, this would mean an effective federal tax rate on most long-term capital gains for high earners of 31.8% (25%, plus 3% surtax, plus 3.8% tax on unearned investment income). Additionally, the proposal would impose a 3% surtax on modified adjusted gross income over $5,000,000, effective after December 31, 2021. The effective date for this increase would be September 13, 2021. The proposal would increase the maximum stated capital gain rate from 20% to 25%. A summary can be found here and the full text here. UPDATE: The House Ways and Means Committee released their tax proposal on September 13, 2021. ![]()
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