ST. LOUIS — The tax proposals President Joe Biden outlined last week give individuals, businesses and financial advisers a lot to watch for but little specific guidance, according to Rob Haggerty, a tax partner at Brown Smith Wallace.
“Virtually all of the president’s proposals are consistent with his campaign platform,” Haggerty said, "but these proposed large tax increases are providing taxpayers and advisers alike headaches," for four main reasons:
They are significant increases. There is no way of handicapping the likelihood of passage. There has been virtually no discussion of effective dates. We already have seen several tax rule changes applying retroactively, notably the Paycheck Protection Program (PPP) loan forgiveness tax effect, and the 2020 taxability of unemployment benefits.
Haggerty said that the timing of transactions, income recognition and other basic tax planning become particularly important — and difficult — without more information.
Haggerty said the most significant tax changes are:
- The top tax rate for individuals is proposed to increase from 37% to 39.6% for the "top 1% of earners," though no dollar threshold was specified.
- The top long-term capital gains tax rate would increase from 20% to 39.6%, while retaining the current 3.8% net investment tax surcharge. This new top capital gain rate would apply only to households earning $1 million or more. There are currently no details as to how the calculation would work.
- Qualified dividends continue to be taxed as capital gains, subject to the new rate.
- “Carried interest” income, also known as "profits interest" income, would be taxed at ordinary rates instead of capital gains rates upon sale.
Click here for the full story.
