I think that would be tough for people and it will impact their retirement."Įliminating the "step-up in basis" would hit family businesses.īiden is once again floating the idea of ending the "stepped-up basis" rule that allows preferential tax treatment for assets held until death.Ĭurrent rules exempt capital gains on assets that a taxpayer does not sell before the end of his or her life, according to the Institute on Taxation and Economic Policy, a non-profit, non-partisan tax policy group. "They don't have big 401(k) accounts they have equity in the business, so selling the business could mean an even bigger hit. The impact would be significant for many small business owners who want to sell businesses, especially the scores of Baby Boomers who are aging out, said Brad Sprong, national industry tax leader for KPMG Private Enterprise. Here are five provisions business owners should be aware of in President Biden's budget:Ī higher capital gains tax rate would be bad for business sellers.īiden's proposal would raise the top marginal rate on long-term capital gains and qualified dividends to 44.6% for income over $1 million, up from 23.8%, including the net investment income tax. "These ideas don't truly go away they just go into hibernation until somebody else comes along," said Ray Beeman, leader of Ernst & Young's Washington Council. It's important for small business owners to be aware of what's being floated, especially since certain provisions that apply more directly to business operations are likely to rear their head at a later time and the recent tax season included some ugly surprises for small businesses related to recent changes in tax law.
The rate is already set to increase at the end of 2025, when certain provisions of The Tax Cuts and Jobs Act sunset, but this proposal would make it effective for taxable years beginning after December 31, 2022, and it could ensnare more businesses. Biden's proposal would boost the top individual rate to 39.6% and change the threshold to $400,000 for a single taxpayer and $450,000 for a married couple filing jointly. Even so, the budget represents efforts to rebalance some of the cuts enacted by The Tax Cuts and Jobs Act of 2017, especially for higher income individuals, said Eric Hylton, national director of compliance at alliantgroup, a Houston-based consultancy.Ĭurrently, the top individual rate is 37% for income over $578,125 for a single taxpayer, or $693,750 for married couples filing jointly. "Some of these tax increases are again being wrongly characterized as the closing of a 'tax loophole' and would directly hit small businesses and compound with other rate hikes," Close said.Īlthough the budget comes at a time when many small businesses are feeling thrown under the bus by the effects of inflation, hiring pressures and other adverse business conditions, the good news is that tax experts are circumspect about the chances of Biden's wish list passing as proposed.įor one, many of the provisions within the budget have been floated before, and a divided Congress lessens the likelihood they'll be adopted without revision. "The White House's 2024 budget proposal contains $2.5 trillion in harmful tax hikes that would crush Main Street's ability to grow and create jobs," said Brad Close, NFIB president, in a statement detailing its campaign to prevent the measures from becoming law. Personal Loans for 670 Credit Score or Lower
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