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Biden Proposes Tax Hike on Businesses and High-Income Individuals

April 29, 2021

By: Amanda Wilson 

Over the last month, President Biden has discussed various tax proposals that will increase income taxes on businesses and high-income individuals. In the last week, we have learned more about what some of those proposals specifically entail.

While the Biden administration recognizes that these proposals may change as they go through the legislative process, here are a few of the key tax provisions that President Biden is currently proposing:

  • Increase the corporate income tax rate from 21% to 28%;
  • Increase the maximum tax rate for individuals from 37% to 39.6% (where it was before the 2017 Tax Cuts and Jobs Act);
  • Increase the capital gains rate from 20% to 39.6% for taxpayers with adjusted gross income in excess of $1 million (this may be lowered to $400,000);
  • Repeal the 20% deduction for pass-through business owners on their qualified business income, although the repeal may be limited to those making more than $400,000;
  • Repeal Section 1031 like-kind exchange treatment on real property if deferred capital gains are in excess of $500,000;
  • Permanently restrict the use of excess business losses;
  • Treat profits from carried interests as ordinary income; and
  • End the step-up in basis for those with capital gains over $1 million ($2.5 million for couples) that is received when inheriting property after a death.

Given the slim majority in the Senate, it is unclear to what extent these tax increases will survive the legislative process, at least in their current form. We will monitor the status of these tax proposals and provide updates as they occur.

This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

A member of the firm’s tax practice, Amanda Wilson concentrates on federal tax planning and structuring. She represents clients in a wide variety of complex federal tax matters with a particular emphasis on pass-through entities such as partnerships, S corporations and real estate investment trusts.

Specifically, Amanda focuses on advising clients on the formation, operation, acquisition and restructuring of such pass-through entities. In addition, she regularly advises clients on the structuring and operation of private equity funds, real estate funds and timber funds. Amanda is the author of the Bloomberg Tax Management Portfolio 718-3rd Edition, Partnerships- Disposition of Partnership Interests or Partnership Business; Partnership Termination.

Amanda regularly works in structuring deals to benefit from tax advantaged structures, including like-kind exchanges, new market tax credits, low income housing tax credits, qualified opportunity zones, and investment tax credits available for solar and other renewable energy. Amanda also has extensive experience in corporate planning and international tax matters, as well as federal tax controversy. Her practice before the Internal Revenue Service (IRS) includes providing advice on audits and appeals, drafting protests and ruling requests, and negotiating settlements.

Prior to joining the firm, Amanda worked for Sutherland Asbill & Brennan LLP (now Eversheds Sutherland), an Am Law 100 firm in the Atlanta office, where she was part of Sutherland’s Tax Practice Group. Amanda has also served as an adjunct professor at Emory University School of Law where she taught Partnership Taxation.

Amanda regularly contributes to the firm’s Taxing Times blog and is a regular panelist on tax webinars hosted by Strafford Publications.

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