Fernway DiarySM

Oct 04, 2021

The tax proposals recently introduced by the Biden administration are not only aimed at revising how corporations are taxed. The American Families Plan, announced on April 28 of this year, includes provisions affecting individual taxpayers intended to increase tax revenue from higher-earning households. This includes proposals to raise the top marginal income tax rate while lowering the threshold at which it takes effect, limit the amount of income that can be classified as capital gains for high earners, and require additional bank reporting on domestic accounts, among others.

The rationale for the proposed changes, according to the Department of the Treasury’s explanation of the fiscal year 2022 revenue proposals, is to eliminate loopholes that allow some income to escape taxation, to even the tax treatment of income generated through capital with that of labor, and to generate revenue for the substantial social proposals included in the bill. Briefly summarized, the proposed changes potentially affecting individuals are:

It is important to note that none of these changes have been enacted yet. Any alteration to the tax law must be approved by Congress, and it is likely that if the provisions listed above are enacted, their exact terms may change during legislative negotiation. It is also worth noting that certain tax changes are already on the horizon, even if no new laws are passed; for example, the top marginal tax rate is set to rise after 2025, when the individual tax cuts in the Tax Cuts and Jobs’ Act expire.

While it could be unwise for individuals to make hasty financial changes based on laws that may not be enacted, being aware of the direction of possible changes in the tax code can serve as the basis for timely action and prudent future planning. Seeking out professional advice can help in determining the potential impact and an advisable course of action.

For more information, please contact your US tax advisory team at youradvisor@fernwaysolutions.com or visit us at www.fernwaysolutions.com.

Disclaimer:
The above content is intended to support the marketing of professional services and should not be construed as written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular tax situation. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Fernway Solutions assumes no obligation to inform the reader of any such changes.