The Department of the Treasury has issued detailed information about the Biden Administration's tax proposals for fiscal year 2022 for "the American Jobs Plan" and "the American Families Plan." Traditionally, the tax community has referred to this annual publication as "the Green Book."
The Biden administration has released the Green Book, which details what they wish for as changes to the way income, and specifically capital gains are taxed. Here is a quick summary of the proposed changes:
- The top marginal individual income tax rate rises from 37% to 39.6%.
- The top individual income tax bracket begins at $452,700, down from $523,601.
- Capital Gains are taxed as ordinary income for taxpayers with incomes over $1 million. It appears that the "date of announcement" is April 28, 2021, the date that the Administration first detailed this proposal.
- Carried Interest are taxed as ordinary income for taxpayers with incomes over $400,000.
- Any transfer of property (including gifts and at death) will be treated as a sale of the property and the capital gains will be taxed, with gains over $1 million being taxed at the new 39.6% rate(plus the 3.8% net investment income tax).
- There is an exclusion for transfers to a spouse or to charity.
- Tax on illiquid assets can be paid over 15 years.
- Tax on a family business is deferred so long as the family operates it.
- Transfers to trusts and partnerships triggers the capital gains tax.
- Trusts that have been in existence for more than 90 years will be taxed,
- There will be no discounts for fractional interest in an asset.
- Treating certain transfers of appreciated property by gift or on death as realization events;
- More generous child tax credits, an expanded earned income tax credit, expanded child and dependent care tax credits, and more generous premium tax credits;
- Eliminating all fossil fuel tax subsidies;
- Expanding tax incentives that encourage clean energy sources, energy efficiency, carbon sequestration, and electric vehicle adoption;
- Investments in taxpayer compliance that would provide the IRS with additional resources and information.
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