Business and Individual Tax Impact
of Proposed American Families Plan

On April 28, 2021, President Joe Biden announced his proposed American Families Plan. The plan will be funded by an increase in tax revenue over a 10-year period, mostly from individual and business tax increases.

While we await more details regarding each provision and its potential passage to law, the following are several key areas as it relates to individual and business taxes, summarized in bullet points, that will be impacted:

  • Increasing the top marginal income tax rate for high earners from 37% to 39.6% for taxpayers with taxable income over $509,300 for married taxpayers filing jointly and over $452,700 for single filers;
  • Taxing capital gains of high-income individuals (with adjusted gross income over $1 million) at a 37% rate;
  • Imposing capital gains tax on property transferred by gift and on property owned at death;
  • Rationalizing the net investment income and Self-Employment Contributions Act (SECA) taxes so that all pass-through business income of high-income individuals is subject to either the net investment income tax or SECA;
  • Taxing carried interests as ordinary income for partners with taxable income over $400,000;
  • Limiting the deferral of gain from like-kind exchanges to $500,000 per taxpayer ($1 million for married taxpayers filing jointly) per year;
  • Providing the IRS a multiyear appropriation to address tax evasion;
  • Increasing oversight of return preparers by providing Treasury with explicit authority to regulate paid preparers of federal tax returns, including establishing minimum competency standards;
  • Expanding broker information reporting with respect to cryptoassets;
  • Addressing taxpayer noncompliance with listed transactions by extending the statute of limitation and imposing liability on shareholders to collect unpaid corporate income taxes;
  • Raising the corporate income tax rate to 28% from its current 21%;
  • Imposing a 15% minimum tax on book earnings of large corporations; and
  • Providing a 10% tax credit as an incentive for locating jobs and business activity in the United States and removing tax deductions for expenses incurred in connection with moving jobs overseas.

The President has stated his willingness to negotiate the details of his proposals, and it seems this is only the beginning of what is sure to be a long legislative process.

Galleros Robinson will be watching every step of the process and will keep you updated with future details.

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.