INCOME TAX |
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Current Tax Law |
Potential Tax Law Changes |
Recent Status |
Top marginal tax rate of 37% | Top marginal tax rate of 39.6% (Taxable Income over $509,300 joint/$452,700 single) Proposed effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
Top long term capital gains and qualified dividends tax rate of 20% | Ordinary income rates on capital gains and qualified dividends on taxable incomes over $1M (37% in 2021, and 39.6% proposed for 2022) Proposed effective date: April 2021 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
3.8% Medicare Tax applies to certain income such as Net Investment Income, self-employment tax, or additional Medicare Tax | Expansion of 3.8% Medicare Tax to all business income (including S-Corps) for taxpayers earning more than $400,000, effectively increasing the top tax rate to 43.4%. Material participation rules apply. Proposed Effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
$10,000 Cap on SALT Deduction | Eliminate SALT Deduction Cap | S. 85 Introduced in the Senate by Sen. Charles Schumer (D-NY) – January 2021 H.R. 946 Introduced in the House of Represenatives by Rep. Bill Pascrell Jr. (D-NJ) – February 2021 |
Qualified Business Income deducton (199A) of 20% of eligible business income | Elimination of QBI Deduction for those making $400,000 or more | Previous Biden Proposal |
1031 Exchanges may be used to defer gain when real estate is sold and exchanged for like-kind property. | Limit 1031 exchange deferral to $500,000 per taxpayer ($1M joint) Proposed Effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
Opportunity zones may be used to defer capital gains and also generate future potential tax-free gains | Eliminate or Limit Opportunity Zone Tax benefits | Previous Biden Proposal |
Carried Interest is taxed at long-term capital gains rates on assets held for 3 years Profits interests are taxed at long-term capital gains rates |
Carried Interest & profits interests taxed at ordinary income rates Carried Interest & profits interest also subject to self-employment taxes Proposed effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
$2,000 Child Tax Credit, $3,000 for 2021 under the American Rescue Plan | Extend $3,000 Child Tax Credit through 2025 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
TRUST, GIFT, and ESTATE TAX |
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Current Tax Law |
Potential Tax Law Changes |
Recent Status |
$11,700,000 gift/estate and generation-skipping exemption | Reduce exemption amount to potentially $5M, $3.5M or lower, potentially retroactive |
S. 994 Introduced in the Senate by Sen. Bernard Sanders (I-VT) – March 2021 |
$15,000/individual and $30,000/couple Annual Gift Exclusion per donee | $20,000 cap on Annual Gift exclusion per donee, and $50,000 cap to all donees combined |
S. 994 Introduced in the Senate by Sen. Bernard Sanders (I-VT) – March 2021 |
Top estate tax rate of 40% | Top estate tax rate of 45% or higher |
S. 994 Introduced in the Senate by Sen. Bernard Sanders (I-VT) – March 2021 |
Cost basis of assets are “stepped up” at death eliminating potential capital gains for heirs | Eliminating “step-up” in basis and automatically taxings gains in excess of $1M. Some exceptions apply for inheriting family owned businesses. Transfers to a spouse do not receive a “step-up” but also do not generate a capital gain. Proposed Effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
No capital gain tax incurred on gifted assets until the assets are sold | Impose a capital gain tax on property transferred by gift Impose a capital gain tax on prior gifts if the asset goes untaxed for 90 years beginning in 1940. Proposed Effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Families Plan |
Grantor trusts currently not subject to estate taxes | Grantor trusts would be subject to estate tax |
S. 994 Introduced in the Senate by Sen. Bernard Sanders (I-VT) – March 2021 |
CORPORATE TAX |
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Current Tax Law |
Potential Tax Law Changes |
Recent Status |
Corporate tax rate of 21% | Corporate tax rate of 28% |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Jobs Plan |
Impose a 15% minimum tax on book earnings of large corporations with incomes in excess of $2B Proposed effective date: 2022 |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Jobs Plan |
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Providing a 10% tax credit as incentive for locating jobs and business activity in the US Removing Deductions for expenses incurred with moving jobs overseas |
US Treasury – General Explanation of Administration’s FY 2022 Revenue Proposals” – American Jobs Plan |
PAYROLL TAX |
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Current Tax Law |
Potential Tax Law Changes |
Recent Status |
6.2% Social Security Tax on wages up to $142,800 | Additional 12.4% Social Security tax on wage income over $400,000 evenly split between employees and employers No Additional tax on wages between $142,800 and $400,000 | Previous Biden Proposal |
INCOME TAX – Current Tax Law |
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Top marginal tax rate of 37% |
Top long term capital gains and qualified dividends tax rate of 20% |
3.8% Medicare Tax applies to certain income such as Net Investment Income, self-employment tax, or additional Medicare Tax |
$10,000 Cap on SALT Deduction |
Qualified Business Income deducton (199A) of 20% of eligible business income |
1031 Exchanges may be used to defer gain when real estate is sold and exchanged for like-kind property. |
Opportunity zones may be used to defer capital gains and also generate future potential tax-free gains |
Carried Interest is taxed at long-term capital gains rates on assets held for 3 years |
$2,000 Child Tax Credit, $3,000 for 2021 under the American Rescue Plan |
INCOME TAX – Potential Tax Law Changes |
Top marginal tax rate of 39.6% |
Ordinary income rates on capital gains and qualified dividends (39.6% top rate) on taxable incomes over $1M |
Expansion of 3.8% Medicare Tax to All income for taxpayers earning more than $400,000, effectively increasing the top tax rate to 43.4% |
Eliminate SALT Deduction Cap |
Elimination of QBI Deduction for those making $400,000 or more |
Elimination of 1031 exchange deferral when the gain exceeds $500,000 |
Eliminate or Limit Opportunity Zone Tax benefits |
Carried Interest taxed at ordinary income rates |
Extend $3,000 Child Tax Credit through 2025 |
TRUST, GIFT, and ESTATE TAX – Current Tax Law |
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$11,700,000 gift/estate and generation-skipping exemption |
$15,000/individual and $30,000/couple Annual Gift Exclusion per donee |
Top estate tax rate of 40% |
Cost basis of assets are “stepped up” at death eliminating potential capital gains for heirs |
Grantor trusts currently not subject to estate taxes |
TRUST, GIFT, and ESTATE TAX – Potential Tax Law Changes |
Reduce exemption amount to potentially $5M, $3.5M or lower, potentially retroactive |
$20,000 cap on Annual Gift exclusion per donee, and $50,000 cap to all donees combined |
Top estate tax rate of 45% or higher |
Eliminating “step-up” in basis and automatically taxings gains in excess of $1M. Some exceptions apply for inheriting family owned businesses. |
Grantor trusts would be subject to estate tax |
CORPORATE TAX – Current Tax Law |
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Corporate tax rate of 21% | ||
CORPORATE TAX – Potential Tax Law Changes |
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Corporate tax rate of 28% |
PAYROLL TAX – Current Tax Law |
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6.2% Social Security Tax on wages up to $142,800 |
PAYROLL TAX – Potential Tax Law Changes |
Additional 12.4% Social Security tax on wage income over $400,000 evenly split between employees and employers No Additional tax on wages between $142,800 and $400,000 |