Last Friday, the Whitehouse released a 72-page Fiscal Year End 2022 Budget. It is worthwhile for you to familiarize yourself with its contents, as it is brimming with legislative changes.
Here are a few insights that may impact your business and individual taxes:
Increased top marginal individual tax rate to 39.6% ($509,300 for married individuals filing a joint return, $452,700 for unmarried individuals (other than surviving spouses), $481,000 for head of household filers, and $254,650 for married individuals filing a separate return)
- Increased Corporate Rate to 28%
- Increased long term capital gains and qualified dividends tax rate to 39.6%, (or 43.4% if including Net Investment Income Tax – NIIT), for taxpayers with income exceeding $1M, or $500k for Married Filing Separately (MFS)
- Transfers of appreciated property by gift or on death to be treated as realization events
- For taxpayers with adjusted gross income over $400,000, the definition of net investment tax would be amended to include gross income and gain from any trades or businesses that are not otherwise subject to employment taxes
- S corporation owners who materially participate in the trade or business would be subject to Self-Employment Tax (SECA) taxes on their distributive shares of the business’s income to the extent that this income exceeds $400k
- The budget includes direct additional resources to go towards enforcement against those with the highest incomes, rather than Americans with actual income of less than $400,000
Limits on deferral of capital gains from 1031 like-kind exchanges (allows for up to 500k for each taxpayer)
And this is just the tip of the iceberg. Tax reduction planning has just become more important than ever!
If you’d like help understanding how this may apply to you, and what proactive strategies you should be implementing before these changes occur, schedule a consultation.