President Biden Proposes Tax Increases in the American Families Plan

Written by Lisa Billings on April 28, 2021

Warren Averett American Families Plan

The American Families Plan presented by President Biden on April 28, 2021, includes several revenue raising tax increases for wealthy taxpayers. While the plan is currently a proposal, we will be watching it closely as it moves through Congress. Some of the tax increases in the plan will:

  • Increase the top tax bracket for ordinary income to 39.6% from 37%;
  • Tax all capital gains at ordinary income rates for taxpayers with income over $1,000,000. This would raise the tax rate for long term gains for these taxpayers from 20% to 39.6%. The top tax rate would be 43.4% including Net Investment Income Tax (NIIT);
  • Remove the ability to step-up the basis of assets at death for unrealized gains in excess of $1,000,000;
  • Remove the ability to perform a like kind exchange on the sale of real estate if the gain is in excess of $500,000;
  • Increase the applicability of the NIIT (3.8%) to all income over $400,000; and
  • Completely close the carried interest provisions. Under the Tax Cuts and Jobs Act of 2017, Congress put a three-year holding period to achieve long-term treatment. The American Families Plan will remove the potential for long term tax treatment completely.

While there are many tax increases in the plan, there are a few increases that have previously been mentioned by the administration that appear not to have made it into the proposal including reducing the current estate tax exemption and a repeal of the Qualified Business Income deduction.

If you have questions about how this plan will affect you and your business, please contact your Warren Averett advisor directly.

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