Contained below are relevant provisions from President Biden’s tax proposal. The proposals are not legislation, and each proposal will need to be introduced and passed by Congress.
Individual Taxation Proposals
- Raise the top individual income tax rate to 39.6% for incomes over $400,000 for single filers and $450,000 for joint filers.
- Increase the Net Investment Income Tax (NIIT) rate from 3.8% to 5% for incomes exceeding $400,000, and expand the NIIT to cover active pass-through income.
- Tax long-term capital gains and dividends as ordinary income for incomes above $1 million. Implement a new 25% minimum tax on billionaires, which includes unrealized capital gains.
- Introduce new rules for high-income taxpayers using retirement accounts, limiting contributions for those with large balances.
- Close loopholes related to estate and gift taxes, which will affect certain trust arrangements.
- Expand the Child Tax Credit and Earned Income Tax Credit permanently, as introduced by the American Rescue Plan.
- Extend tax credits for low-income housing and introduce the Neighborhood Homes Credit for affordable housing in distressed areas.
- Continue the expanded eligibility for healthcare premium tax credits beyond 2025.
Cryptocurrency Reporting
- Apply securities loan rules to digital assets.
- Extend the application of mark-to-market regulations to include dealers and traders of digital assets.
- Require information reporting for digital asset transactions.
Real Estate and Investments
- Limit like-kind exchanges in real estate to gains of $500,000 ($1 million for married couples filing jointly).
- Propose a 4% tax on corporate stock buybacks, increased from the current 1%.
Partnership Taxation
- Prevent basis shifting by related partners.
- Include 3.8% Medicare tax and self-employment tax in the centralized partnership regime.
Private Foundation Taxation
- Include 3.8% Medicare tax and self-employment tax in the centralized partnership regime.
Corporate Tax
- Proposed increase of the corporate income tax rate from 21% to 28%.
International Taxation
- Provide a 10% tax credit for expenses incurred in “onshoring” and deny deductions for “offshoring” a U.S. trade or business.
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The CleverProfits writing team includes various team members in Advisory, Financial Strategy, Tax, and Leadership. Our goal is to provide relevant and easy-to-understand financial content to help founders and business leaders reach their true potential.
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