Nobody wants to pay higher taxes and have less money to take home to their families. Some taxpayers say taxes alone drive all their decisions, which I don’t understand. I know one man in Texas who actually sold his house and moved to another state, away from his grandchildren, just to avoid increased real estate taxes. Guess his mother never told him: “Moderation in all things.” Personally, I would gladly pay a little more in taxes in exchange for a little less drama and acrimony in our country.
It is time to consider the tax changes we might see, if Biden wins the election, as well as the inevitable court battles afterward. Although nothing is certain yet, there is some consensus that he will try to make the following changes:
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If you are a top-earner, your highest marginal tax bracket could increase from 37% to 43.4%, including the net investment income tax (NIIT) of 3.8%, which only impacts those with significant investment income.
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If your adjusted gross income (AGI) is over a million dollars annually, some of your realized long-term capital gains could be subject to the higher ordinary income tax rates instead of the lower long-term capital gains rates.
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Wealthy taxpayers often refuse to sell assets with big capital gains before their death, because their cost basis will be increased to the date-of-death values for the benefit of their heirs, allowing those capital gains to escape estate taxation forever. This tax dodge would probably be eliminated.
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If you die today, there would be no estate tax on the first $11,580,000 of your taxable estate – double that for a married couple. Biden would return the exemption to the pre-2017 level of $3.5 million each or $7 million per married couple. Is a $7 million exemption from estate tax enough for you and your spouse?
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Corporations would see their top marginal tax bracket increase from 21% to its pre-2017 level of 28%. (Truth-in-Blogging: I think this one is a bad idea.)