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Analyzing Biden's New "American Families Plan" Tax Proposal

Democrats in the House introduced a new tax proposal on September 13, 2021 that could have an impact on many of our clients. From changing the maximum tax bracket, to increasing taxes on capital gains, let’s take a quick dive into the highlights of the proposed tax legislation.

The new bill proposes a top tax rate of 39.6% and this new increase would take effect starting in 2022. It also lowers the amount of income needed to get into the top tax bracket (shown below).

The next proposal is a new long-term capital gains rate of 25% for single filers making over $400,000 and joint filers making over $450,000 (the highest it has been since 1997).

Another tax implication is the introduction of a new 3.8% surtax to high-income S corporation owners. S corp. profits will be added to together with “regular” investment income (which is being called Specified Net Income) and this 3.8% surtax will be added to either the client’s net investment income or the Specified Net Income (whichever is greater).

This proposal also extends, and expands, the Child Tax Credit. The Child Tax Credit is a fully refundable tax credit used by the federal government to help families who have children by providing an advanced refundable credit ($3000/child/year). The new legislation increases that amount for children under the age of 6 from the $3000/year/child to $3600/year/child. Not only does the new proposal increase the amount but starting in 2023, the Child Tax Credit will turn into a monthly payment ($250/month/child for children ages 6+ and $300/month/child for children under the age of 6).

If you have any questions about the new tax proposal and how it may affect your taxes, please do not hesitate to call us at 229-245-6022 or feel free to come in and speak to us in person at 3321 N Valdosta Road, Valdosta, GA 31602.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through GWM Advisors, a registered investment advisor. GWM Advisors and Southern Point Investment Partners are separate entities from LPL Financial.

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