Biden’s Tax Proposals Are Not Just for the Really Wealthy


In his proposal, Mr Biden clarified a number of issues for the middle class. He recommended an exemption of $ 1 million on capital gains on assets transferred to heirs. He has also maintained the $ 250,000 exemption on taxable profits equal to the value of an individual’s primary residence. (These exceptions would double for a couple.)

In many cases, however, this would affect people who would not have thought of paying tax on death, regardless of whether the inheritance tax exemption stayed at the current $ 11.7 million or decreased to $ 3.5 million, which is to be expected was.

“The changes to the base deck – that’s the curveball,” said Paul Saganey, founder and president of Integrated Partners, a financial advisory firm. “It will really surprise people. People don’t know what it is or what it means. So how can you quantify the impact? “

There was also no mention of the reintroduction of the full state and local tax deduction known as SALT. The cap on these deductions in the 2017 Tax Act has harmed people in the Northeast and West Coast states, where property and state taxes are higher.

Mr Biden has proposed limiting any disruption to real estate transactions. It would cap the value of 1031 (b) exchanges at $ 500,000, which has essentially enabled real estate investors to convert profits from sales of buildings into new buildings without ever paying capital gains taxes on them. Coupled with the increase in the base at death, which wiped out any increases in the value of buildings, this was a great tax break for families whose wealth was based on real estate investments and ownership.

Less known is what, if anything, from the “For the 99.5 percentPlan. The plan would close some popular tax cut strategies, many of which were targeted during the Obama administration.

Three of the proposals would be relatively easy to implement. One would end short-term trusts that enable people to pass on the expected appreciation to their heirs tax-free – for example from the sale of a private company. Another would restrict tax-free gifts that can be given to trusts each year to fund things like life insurance to pay estate taxes. A third would restrict the special tax treatment of family partnerships, even if they own liquid securities and are not an operating company.

“You have already written the rules for this,” said Ms. Lucina. “I don’t want to scare anyone that these will come into effect. But some of these could be implemented quickly and seen as fillers. “



Robert Dunfee