Money Talks: New Tax Plan Talking Points

As a firm, we want to share few talking points for the new tax plan being proposed.

Please keep in mind that these are all very preliminary and nothing is set in stone. Most experts agree these are all starting points for negotiations.  We should expect to see changes along the way until a final plan is passed at some point over the next few months.  Our understanding is these would not be applied retroactively.

Capital Gains

• Increase of the capital gains tax for only those earning over $1 million annually.
• Long-term capital gains increased from 23.8% to 43.4%.  This includes the Medicare investment income surtax of 3.8%  (I personally feel that this will be negotiated down to somewhere between 28-32%)

Income Tax

• Increase in rates for “households” earning more than $400,000 annually. 
• Top tax rate would go from 37% to 39.6%.

Corporate Taxes

• Raise the corporate tax rate from 21% to 28%
• Ensure big firms pay at least 15% in taxes – Close the loopholes that allow these corporations to reduce their tax liability through deductions, exemptions, offshoring and other mechanisms.

Inheritance

• Elimination of the step up in cost basis at death.  Capital gains tax would be realized on appreciated assets at an owner’s death.  Under this scenario, there would be a $1 million exemption.  Capital gains tax would then be paid on capital gains in excess of $1 million.
• At this point, no proposed changes to the inheritance tax.

SALT Limitations

• Currently there is a $10,000 cap on state and local tax (SALT) than can be deducted for NJ residents.  This disproportionately affects higher income earners that pay more of these taxes.  Initially, it appears these limitations will stay in place.  However, it’s possible a repeal of SALT limitations becomes a bargaining chip in discussions.

Nothing provided herein constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.

This blog contains forward-looking statements relating to the U.S. tax code generally. Forward-looking statements which involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual regulations may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of The Genwealth Group or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.