“There was a lot to fear about what might happen on the estate and gift side early on in this process. A lot of proposals that were really quite drastic and sort of scared a lot of people that do estate and gift planning. And most notably, and sort of as a sigh of relief to a lot of people, just about all of these provisions have just fallen out and are no longer on the table.”
Things really continue to be far from settled in Congress regarding what sort of income tax changes are going to be enacted. But, while a proposed tax bill remains stalled in Congress, it is not the same as the 2021 tax legislation proposed last fall. In today’s episode of Savvy & Sensible, ARB partners Holly Ferguson and Dan Doiron discuss where things stand for several previously proposed provisions.
The latest proposal drops off several provisions previously proposed in the 2021 tax legislation:
- While previous proposals mentioned increasing the ordinary income tax rates to 39.6%, under the latest proposal, they would remain at 37%.
- There was also a lot of talk about increasing the highest long term capital gains and qualified dividend rate up to 25%. However, under the current proposal, that would remain at its current highest rate of 20%.
The latest proposal changes some provisions previously proposed in the 2021 tax legislation:
- There was talk about imposing a 3% surtax when AGI exceeded $5 million dollars. Under the current proposal, individuals would face a 5% surtax when their AGI exceeds $10 million. When an individual’s AGI exceeds $25 million, an additional 3% surtax would be assessed.
- The problem is that they’ve instituted similar surtaxes on trusts at income levels that are way lower than those amounts.
- When a trust hits $250,000 of AGI it would face the 5 % surtax
- When a trust hits $500,000 of AGI, it would face the additional 3%
- Under the latest proposal, the 3.8% net investment income tax (NIIT) would be expanded to include income derived in the ordinary course of a trade or business.
The latest proposal adds some new, more obscure provisions, and there are some efforts underway to try to increase the $10,000 itemized deduction limitation for state and local taxes. The House bill has increased the limit up to $80,000; however, the Senate has been silent on this from a negotiation standpoint. There is talk of trying to increase that itemized deduction cap that came into existence back in 2018.
On the estate and gift tax side of things, there was a lot to fear about what might happen early on in this process. A lot of proposals were really quite drastic and scared a lot of people that do estate and gift planning. However, there has been a notable sigh of relief for many, since just about all of these provisions are no longer on the table, as the latest proposal would NOT:
- decrease the lifetime exemption;
- eliminate certain gift and estate tax reduction techniques;
- eliminate the step up in basis and date of death to fair market; or
- make death an income recognition event.
We’re Here To Help
ARB’s tax professionals are dedicated to helping individuals and businesses understand and comply with new and evolving legislation. If you have any questions, contact Dan Doiron or Holly Ferguson today.
