This week’s theme is: Biden’s tax plan impact on investors 

Today, I’m talking about biden’s plans for capital gains. Here’s what it will look like if Biden’s plans become law: 

It’s mostly upper-income individuals who would face higher capital gains taxes under the Biden plan. Under current law, the maximum effective federal income tax rate on net long-term capital gains and qualified dividends recognized by individual taxpayers is 23.8%.

Under the Biden plan, net long-term gains (and presumably dividends) collected by those with incomes above $1 million would be taxed at the same rate as income - which is the 39.6% maximum rate. When you layer in the 3.8% for net investment income tax, the maximum effective rate on net long-term gains would 43.4%. That would be almost double the current maximum effective rate of only 23.8%! 

Holy expletive! That’s a massive increase in taxes! However, it’s important to note that that tax increase is for those making more than $1 million. If your income is much lower than that, I haven’t seen any tax proposals from Biden that would increase taxes for even those making $100,000-$200,000 of income per year. 

So hopefully, this change won’t impact you because your income isn’t high enough, but it is a big problem for high income earners or those planning to sell a business with a low-basis. So if that’s you, you’ll want to do some serious planning to try to mitigate the impact of the capital gains tax. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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