The Biden administration’s fiscal year 2022 revenue proposals highlight an important opportunity to work with an experienced estate planning and tax strategy lawyer. Here’s what you need to know about some of the proposals.

Individual Income Tax Rate Increase

The top marginal individual tax rate, if approved, would be increased to 39.6% which would be effective for taxable years starting after the end of 2021. In 2002 the top marginal tax rate would apply to income over $509,300 for married individuals filing a joint return, $254,650 for married individuals filing a separate return and $481,000 for head of household filers. These thresholds would then be adjusted after 2022 to be indexed for inflation.

Capital Gains Taxation

Long term capital gains and qualified dividends for those taxpayers with AGI of over $1 million would be hit tax that ordinary income rates only to the extent that their AGI for the individual taxpayer exceeds $1 million or $500,000 for married filing separately.

Corporate Income Tax Rate Increase

The corporate income tax rate for C corporations would raise from 21% to 28%. It would be effective for those taxable years starting after the end of 2021.

Transfers of Appreciated Property on Death as Realization Events or By Gift as Realization Events

The deceased owner or donor of an appreciated asset under this proposal would realize a capital gain at the time the transfer occurred. A transfer would be defined under the estate and gift tax provisions. There are a number of exclusions to the proposed capital gain rules, including;

  • The $250,000 per person exclusion only associated with capital gains on a principal residence today would apply to all residences.
  • Transfers by a decedent to a charity or a US spouse would carry over the basis of the decedent.
  • The proposal would exclude gains on tangible personal property.
  • The transfers of appreciated assets into a split interest trust would generate a taxable capital gain.
  • The proposal would also allow for a $1 million per person exclusion from recognition of other unrealized capital gains on property that was held at death or transferred by gift.
  • Payment of tax for the appreciation of certain family operated or family owned businesses not due until the interest in the business is sold or until the business seizes to be operated and family owned.

In all of these circumstances it’s important to have a relationship with a Georgia tax strategy lawyer who can help guide you through these processes and prepare you for what to expect.