Issued on May 28, 2021, the Department of the Treasury’s “Green Book,” summarizes the Biden administration’s tax proposals for the fiscal year 2022 budget. While these are simply proposals, they are certainly worth considering when contemplating certain transactions through the end of the year. Much more will be known as the budget reconciliation legislation process moves forward towards a conclusion – hopefully before October.
Some of the Green Book’s most significant proposals include:
- Increasing the federal corporate income tax rate from 21% to 28% and implementing a 15% minimum tax on the book earnings of certain large corporations
- Increasing the highest individual marginal tax rate from 37% to 39.6%
- Increasing the long-term capital gain rate and qualified dividend rate to 39.6% on taxable income exceeding $1 million. This change has been proposed with an effective date retroactive to May 28, 2021 or earlier
- Limiting the annual gain deferral on the aggregate amount of IRC §1031 like-kind exchanges to $500,000 per person
- Making permanent the IRC 461(l) disallowance of a deduction for “excess business losses” – must be carried forward
- Taxing carried interest as ordinary income if the partner’s overall taxable income is over $400,000 (same applies to the partner’s sale of his partnership interest)
- Treating transfers of appreciated property by gift or on death as triggers for capital gain recognition with no step up in basis (with a $1 million per person lifetime exclusion)
- Subjecting all pass-through business income of high-income taxpayers to the 3.8% net investment income tax (or 3.8% Medicare tax for self-employed)
If you have any questions or how these proposals may impact you, please contact us by filling out our contact us form.