Throughout this entire year, we’ve been hearing mumblings about Biden administration future tax changes and what they may look like. Finally, we’ve gotten some specific changes detailed from Congress and we want to share some of their proposals with you.
- Top corporate tax rate to go up to 26% on income above $5 million. Trump administration lowered this to 21% from its previous 35%.
- Top individual tax rate moves to 39.6%, ending Trump’s tax cut down to 37%.
- Top capital gains rate moves to 25% (all others remain) from its current 20%.
- Additional 3% tax on income (AGI) in excess of $5 million (this is a brand new income tax on top of the increased 39.6% top rate)
- If IRA/Roth has balance above $10 million and you make over $400k, you can no longer contribute.
- If IRA/Roth/401(k) has balance above $10 million and you make over $400k, an RMD will apply the following year equal to 50% of the aggregated account values above $10 million.
- Roth conversions will be disallowed for those earning over $400k.
- After-tax contributions to retirement plans and IRAs will be disallowed.
There’s quite a few more changes and proposals, but these capture the most important and high level changes most are concerned about. There are threats of an additional surtax on high earnings (above $5 million) and for the estate tax exemption to be reduced back to what it was before the Trump tax changes.
While I personally think these increases in taxes will be negative for the economy, they aren’t as extreme as previously threatened from the current administration, and therefore likely won’t be catastrophic to the markets. We’re staying on top of these changes everyday and will be sure to communicate any changes we find out about. As always, let us know if we can help ????