Alongside President Biden’s American Families Plan, there is a proposed tax reform agenda that is set to be passed by Congress between October 1, 2021 and the end of the year, under budget reconciliation.
If you pay income taxes or have a retirement account, capital gains or assets for inheritance, here are some of the ways the proposed changes to tax laws could affect you:
- Estate tax increase – an increase in estate taxes is expected due to a dramatic lowering of the estate tax exemption
- Possible repeal of step-up basis – when you pass away, your heirs might no longer get a step-up in basis on assets included in your gross taxable estate which will mean they are no longer we able to sell real estate tax-free
- Capital gains tax increase – raising the highest capital gains tax rate to 43.4% has been proposed by Biden, but experts predict an increase of 25% to 28%
- Income tax increase – the top marginal rate would increase from 37% to 39.6
- Lowering income for top bracket – top bracket taxes would now apply to married couples filing jointly who make over $509,300, down significantly from the current $628,300 amount
- Capping itemized deductions – a 28% cap on the tax benefit from itemized deduction has been proposed
- Deduction for 401(k) contributions eliminated – the proposal includes replacing this deduction with a tax credit. Your contribution could end up getting taxed at the state level twice
How Do I Prepare?
Before this tax reform bill is passed, talk to an experienced attorney about all of the ways it could affect your estate planning to make sure you’re prepared for the shift. At Mattingly Ford P.S.C., we’re happy to answer any question you may have. Contact our attorneys today at (502) 814-9860. Stay updated with Mattingly Ford Law and continue to read our blog.