Yep, we’re back for more on President Biden’s Proposed American Families Plan. Discussion of the plan is usually over its increase of taxes on the wealthy, while not raising taxes on those who makes less than $400,000, but there are many other proposed programs and changes that will affect the rest of America, across the board. To fund the proposed programs, the most significant changes will come from increased capital gains taxes on those earning more than $1 million in income and from the elimination of the step-up basis for large inherited assets.
The top rate and long-term capital gains tax rates have seen a lot of change in recent decades and if passed, are likely to change even more. If implemented, the top marginal income tax rate would jump from 37% to 39.6% (yikes!) and would be retroactive to April 2021 to avoid the rush of selling assets.
Although most changes would affect only the wealthiest Americans, the effects will trickle down and can affect taxpayers across the country. These changes could take shape for those in line to inherit assets, sell their home of a certain value or if one were to sell their business which would push them over the $1million mark.
While these changes are substantial in nature, the likelihood that they will be passed as is, is low. It is more likely that the changes will undergo some changes of their own first, through revision and negotiations. This process could take several months, but you know what they say! “It’s best to prepare for the worst and hope for the best.” Some ways to review and rebalance your portfolios include converting to Roth accounts, focus on asset location, and increase charitable contributions, among others. At Friedman + Huey, when you’re ready to discuss these changes, we’ll be ready for you!
This information is general, not specific, and is only meant to give perspectives on matters discussed which may change without notice. It is not intended to be tax or financial advice. Information has been obtained from various sources believed to be reliable, but interpretations and accuracy are not assured. Please contact us for any questions you may have or to revisit your planning strategies.