While social issues have dominated news coverage recently, one of the most contentious and important issues in Washington never changes – tax policy. One of former President Donald Trump’s biggest victories was his 2017 tax plan that drastically reduced taxes for wealthy Americans and corporations. Now, President Joe Biden is trying to roll back some of those changes and introduce some new policies of his own. Two of the biggest proposals he introduced in his recent budget were a big increase to the long-term capital gains tax and a new tax on the wealthiest Americans.
For help figuring out how these changes will impact you and your family, consider working with a financial advisor.
Biden Capital Gains Tax Proposal
Capital gains are money you were from selling or trading an asset – for instance, if you bought 100 shares of a stock at $10 a share and sell it five years later for $20 a share, the $1,000 you made is a capital gain. While short-term capital gains – referring to assets sold within a year of purchasing – are currently taxed as regular income at the federal level, long-term capital gains, which are held for at least a year, have a special rate. The top right right now is 20%.
Biden’s plan calls to nearly double that top rate to 39.6%. It’s worth noting, thought, that this rate would only apply to investors earning at least $1 million per year.
Biden’s Wealth Tax
One of the brand-new initiatives in Biden’s budget is for a minimum tax rich people While most taxes in America are based on income, this tax would be based on net worth – thus, it’s generally referred to as a “wealth tax.”
Biden’s plan is to establish a minimum tax rate of 25% for all households with a net worth of at least $100 million. Currently, the wealthiest taxpayers pay an average effective rate of just 8%, so this would be a radical change for the elite of the elite – and potentially generate a lot of money for the federal government’s coffers.
The Bottom Line
President Joe Biden recently proposed a new budget with myriad potential changes to how taxes are collected in America. Two of the changes aimed at collecting more money from very rich people are to establish a minimum tax rate of 25% for families with wealth of at least $100 million and to nearly double the top rate for capital gains. Both of these ideas have merely been proposed by the President – and with the GOP now in charge of the House, it will be a long road likely filled with compromises to get a budget passed.
Financial Planning Tips
-
To navigate the ever-changing world of taxes, it’s a good idea to get professional help with your finances. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
-
To get a sense of what your tax bill could be this year, use SmartAsset’s free tax calculator.
Photo credit: ©iStock.com/SARINYAPINNGAM, ©iStock.com/courtneyk
The post Are You Rich? Biden Wants to Double Your Capital Gains Taxes and Implement a Wealth Tax appeared first on SmartAsset Blog.
