NOTE: This update is based on available public information known as of November 3, 2021. Circumstances may have changed or be changed thereafter.
President Biden recently announced a framework agreement with congressional majority leadership on the Build Back Better legislation.1 The framework includes a significant number of changes when compared to prior tax proposals.
The new moles2
The most relevant proposed changes for certain Aperio clients are a 5% surcharge on modified adjusted gross income (AGI) greater than $10 million and an additional 3% surcharge on modified AGI greater than $25 million.
Additionally, high-income taxpayers with large retirement account balances would face new rules and limitations on retirement contributions, required minimum distributions, and Roth conversions.
What’s not included
Just as important, a significant number of previous tax proposals were omitted from this most recent framework, including the following:
- Making transfers during life and at death gain realization events
- Increase in the top ordinary income tax rate
- Increase in the top capital gains tax rate
- Billionaire “mark to market” tax regime
- Decrease in the gift and estate tax exemption
- Changes to the grantor trust rules
In other words, the tax provisions included in this framework would likely be less severe for many Aperio clients than those in earlier tax proposals.
Things could change
The tax legislative environment remains extremely fluid, and additional amendments to the legislation may be made. Tax proposals now excluded from this framework, including some of those noted above, could still be added. We will continue to monitor the legislative process and provide updates as appropriate.
Until the next mole rears its head …
Other Tax Regime Blogs
- Why "Whack-a-Mole" Isn’t a Good Tax Strategy
- Steps Advisors Could Take Ahead of Potential Changes in Capital Gains Tax Law
- Impact of Green Book Capital Gains Proposals on Loss-Harvesting Strategies
- Repeal of Basis Step-Up: Third Time’s the Charm?
- Loss Harvesting with Inflation-Adjusted Gains
- Tax Planning Under Election Uncertainty
- Impact of Biden’s Capital Gains Proposal on the Performance of Loss-Harvesting Strategies
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