Last month, the Biden Administration introduced a sweeping plan called the American Families Plan that is focused, in the Administration’s words, on “an investment in our kids, our families, and our economic future.” A major purpose of the plan is to grow the middle class and to find some tax equity given the income inequality that is creating economic hurdles for many people in the U.S.
Accordingly, in this article, we will discuss that part of the American Families Plan that seeks to “reward work and not wealth.” If, after reading this article, you would like to discuss the American Families Plan or talk about your own tax situation, we invite you to call the Sarasota tax lawyers at the Law Office of Mary E. King, P.L.
The Law Office of Mary E. King, P.L. can make sure that your tax issues are resolved efficiently and at the lowest cost to you. Please fill out our online contact form, or call us at 941-906-7585 today.
Restoring the Tax Rate for Those in the Top One Percent
In 2017, the maximum income tax rate for the wealthiest households – those in the top one percent – was reduced from 39.6 percent to 37 percent. By cutting taxes on those at the top, the 2017 tax changes exclusively benefitted America’s richest taxpayers.
The American Families Plan, in response to the 2017 tax law, seeks to restore the top tax bracket back to 39.6 percent. Again, this increase only applies to the top one percent of earners.
Elimination of Capital Gains Tax Break for Those Who Make $1 Million, and Other Loopholes
Under the tax code passed in 2017, the wealthy pay fewer taxes on capital gains and dividends than many middle-class taxpayers pay on their wages. Under President Biden’s plan, households making over $1 million pay the same 39.6 percent rate on all their income – both income and capital gains.
Additionally, the loophole that allows the richest Americans to escape taxes by passing their wealth down to their heirs would be eliminated. Currently, the income tax basis of the property passed down from a decedent is its fair market value at the time of the decedent’s death, rather than the cost when it was acquired. The Plan would end this practice of ‘stepping up the basis for gains of more than $1 million and ensure that the appreciation of the property before death is taxed adequately if the property is not donated to charity. Family-owned businesses and farms would be exempt from paying taxes when passed on to heirs who continue to run the business.
The Plan would also eliminate the carried interest loophole, requiring hedge fund partners to pay the ordinary tax rate on their income like every other worker. A ‘carried interest’ is a right that allows a fund manager to a share of the partnership’s profits and is taxable at a preferential capital gains rate of 20 percent under the current tax code.
President Biden is also calling for an end to the real estate tax break that allows property investors to defer taxes when they exchange property, known as ‘like kind’ exchanges. This revision would apply to gains greater than $500,000.
Under the Plan, the limitation that restricts deductions for significant excess business losses would be permanent. An excess business loss is an amount by which the total deductions for all a taxpayer’s businesses exceeds the businesses’ total gross income and gains, plus $250,000, or $500,000 for a joint return. This limitation is set to expire in 2025.
Currently, the Medicare tax is 3.8 percent imposed on a portion of a taxpayer’s income. The tax is paid on the lesser of the taxpayer’s net investment income or the amount the taxpayer’s adjusted gross income exceeds the application of the adjusted gross income threshold, which is $200,000 for single taxpayers and $250,000 for married taxpayers. Under the President’s Plan, the threshold for applying the 3.8 percent Medicare tax would increase to $400,000.
Our Experienced Sarasota Tax Lawyers Will Keep Monitoring the Plan’s Progress Through Congress
Because there is no guarantee that Congress will approve the American Families Plan, we will continue to monitor its progress. While many of the tax changes should only impact the wealthiest citizens, some of the Plan’s proposals could affect middle-income taxpayers as well. Consider consulting an experienced Sarasota tax lawyer to discuss the impact of the Plan on your income, estate planning, and capital gains transactions.
We invite you to reach out to the Law Offices of Mary E. King to help. Tax matters can be complicated, and thus, it is always helpful to have someone in your corner who understands the tax law and deals with the IRS on a regular basis. Indeed, beyond just the stimulus payment from the IRS, there could be other issues with which a seasoned tax attorney can help.
So, when it comes to dealing with tax relief and tax litigation, you need to talk to a Sarasota tax law attorney who can help. Mary E. King has spent her career concentrating in tax law and can help you with tax scams in Florida and elsewhere. Attorney King has a wealth of information about what types of options would make the most sense for you and your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax lawyer of Florida, is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience as a tax lawyer in Sarasota for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585. Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction