President Biden released his 2023 budget this Monday, March 28th, which included several significant tax changes.
The budget is a proposal and requires the blessing of Congress. To become law
Often, these bills are modified during this process where items are added, deleted or modified in order to come to a resolution.
Items in the budget to take note of:
· Increase in the corporate income tax rate from 21% to 28%
· Raise the individual income tax top rate from 37% to 39.6%
· Long-term capital gains and qualified dividends of taxpayers with taxable income of more than $1 million would be taxed at ordinary rates as opposed to the current long term capital gains rate.
· Require American households worth more than $100 million to pay a rate of at least 20% on their income as well as unrealized gains, closing loopholes for wealthy Americans
· Eliminate like-kind exchanges (Section 1031), or rolling an appreciated property into another property of equal or greater value to defer paying the taxes and realizing the sale.
· Tax carried interests profit as ordinary income
Also in the mix is another bill that was just passed in the House which was designed to boost American retirement savings. This needs to go through the Senate, but the intent is to stretch the age of required minimum distribution from the no 72 years old to a proposed 75 years old. Additionally, the bill allows for the catch-up contribution, currently $6,500 extra that people over 50 can add to max out their retirement further, up to a proposed $10,000.
These proposals will most like change as they work their way through the system, but knowing where the potential tax changes can impact you is a good way to anticipate how to make changes and create a plan. If you need help creating a plan around your circumstances, please reach out for a consult.