Biden Administration’s Proposed Tax Changes | Althaus Law

Proposed Tax Changes in 2021

This article will explain some of the major proposed tax changes under the Biden Administration.

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Estate and Death Tax Changes

While there was a lot of talk about lowering the estate tax threshold on the campaign trail, our understanding is that the federal estate/death tax threshold would stay the same under the new administration’s tax plan. The current thresholds are $11.7 million for a single person, and double that, or $23.4 million, for a married couple. If you pass away with less than that amount of assets, your estate won’t owe any federal estate tax whatsoever.

Who Won’t Be Affected By This

• Married folks who pass away with less than $23.4 million in assets, and single folks who pass away with less than $11.7 million in assets. So basically, the vast, vast, majority of us.

Income Tax Changes

Top individual tax rate would go up to 39.6% from 37%.

Who Would Be Affected By This

• Married couples filing jointly with yearly income over $509,300 and single folks with yearly income over $452,700 will have to pay this tax rate on any income exceeding $452,700.

Who Won’t Be Affected By This

• People with income under $452,700 will not be affected by this tax change at all.

This is fast tracking a future change to the tax code, as this tax rate was already to set to take hold under the previous administration’s tax plan in 2025.

Capital Gains Tax Changes

Taxes raised on realized capital gains over $1 million.

Who Would Be Affected By This

For folks earning over $1 million in realized capital gains, the amount over $1 million would be taxed as ordinary income, which would raise the rate that folks pay on capital gains that exceed $1 million from 20% to 39.6%. For example, if I bought a plane for $500,000, and then sold it a few years later for $2,000,000, I would have $1,500,000 worth of capital gains from that sale. I would then have to pay the 39.6% tax rate on the amount from that sale that exceeds $1 million, which would be $500,000.

Who Won’t Be Affected By This

Everyone who has less than $1 million worth of realized capital gains in a given year, so the vast majority of Americans, or 99.7% of us.

*It is very important to note that these are just proposed changes, and that any tax bill that passes, if any tax bill does pass, would likely contain at least some differences to the above proposed changes after Congress has an opportunity to debate the proposed new law.