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Biden Budget Proposal Puts Effective Date for Capital Gains Rate Increase in Question

By:  Mindy Kamen

President Biden’s tax proposal, first introduced in the American Families Plan, includes increasing the top tax rate on capital gains to 43.4% from 23.8% for households with more than $ 1 million in income.

However, the budget released May 28 assumes the increase is retroactive to when the plan was introduced April 28, which could mean households in this income category could not realize gains at the lower rate.

While the budget proposal and effective date of the rate change still require congressional review and approval, individuals should begin planning to create a tax strategy to accommodate the changes if they become law.

The American Families Plan calls for an increase to the highest ordinary rate of 39.6%; however, clients are still subject to the net investment income tax of 3.8%, which results in the 43.4% rate. The plan also would change the tax rules for unrealized capital gains held until death.

The Janover tax team will monitor this developing situation and provide updates as they become available. Please contact your Janover tax professional or by clicking here to create a strategy to navigate this potential change.

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