President Biden’s ambitious budget proposal aims to shake up the tax landscape by targeting capital gains rates and closing crypto tax loopholes. High earners could face a hefty 44.6% rate on investment income over $1 million, signaling a push to level the playing field. With the potential for combined federal and state rates exceeding 50%, the proposal may have profound implications for stock and crypto investors. Find out how Biden’s plan could impact your investment strategy and the broader financial landscape.
President Biden’s budget proposal is making waves with its aim to increase capital gains rates for high earners. If approved, individuals with taxable income exceeding $1 million could face a hefty 44.6% rate on their investment income. This move is geared towards leveling the playing field between those earning high ordinary income and those earning through investments.
Now, there’s been some fearmongering about a dramatic spike in capital gains rates for ordinary taxpayers, but experts suggest that such concerns may be exaggerated. This proposed increase would actually mark the highest top capital gains tax rate in over a century, a significant change indeed.
When you consider state taxes on top of federal rates, some high-earning investors in stocks and cryptocurrencies could be looking at a total tax rate exceeding 50%. That’s no small chunk out of their investing proceeds.
But it doesn’t stop there. President Biden is also eyeing a corporate income tax rate hike to 28%, a move that would push the U.S. into uncharted territory. Additionally, the proposal includes a rather controversial plan to eliminate stepped-up basis, essentially introducing a second Death Tax that would trigger a capital gains tax at the time of a parent’s passing.
Cryptocurrency holders are also in the spotlight, as the budget seeks to eliminate a special tax subsidy for crypto transactions. The goal is to treat crypto assets more akin to traditional stocks and securities. The IRS has even introduced a new draft tax form that would require detailed reporting of specific crypto transactions, raising concerns about privacy and security.
One noteworthy inclusion on the draft form is the mention of unhosted wallet providers, hinting that the IRS may broaden its definition of brokers to cover such entities. Overall, Biden’s budget proposal paints a picture of increased capital gains taxes, tighter regulations on cryptocurrency transactions, and potentially significant implications for investors. It’s certainly a hot topic worth keeping an eye on.
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