Tax Byte

President Biden has proposed a 2025 budget, and it’s a pie-in-the-sky plan that has no chance of getting through Congress. It is instead a political statement of what might be, not what will be. So, why read about the proposals? Because some well-read client will ask about a provision that particularly irritates them. (Think real estate investor and the Section 1031 proposed limit.)

The proposed budget includes tax increases of $5.1 trillion over the next ten years, and it assumes that the Tax Cut and Jobs Act will not be extended past 2025.

Here are a few items from President Biden’s proposed budget.

• The corporate tax rate would be increased from 21% to 28%.
• The corporate AMT would be increased from 15% to 21%.
• The excess business loss limitation for pass-through businesses would be made permanent.
• The top individual tax rate would increase to from 37% to 39.6% on income above $400,000 for single filers and $450,000 for joint filers.
• Net investment income tax (NIIT) would apply to nonpassive business income (think S corporations) and rates for the NIIT and the additional Medicare tax would increase from 3.8% to 5% on income above $400,000.
• Long-term capital gains and qualified dividends would be taxed as ordinary income for taxable income above $1 million and unrealized capital gains at death above a $5 million exemption ($10 million for joint filers) would be taxed.
• Carried interest would be taxed as ordinary income for those earning over $400,000.
• Section 1031 like-kind exchanges would be limited to a deferral of $500,000 in gains.
• A 25% “billionaire minimum tax would be imposed on capital gains of high-net-worth taxpayers.
• And more. . .
  

Stay tuned, and we’ll be sure to keep you updated on changes relevant to you as more budget details emerge.