This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
You’re most likely well aware of the Biden Administration’s plans to increase taxes on the wealthy, but one of those initiatives is not moving forward.READ THE ARTICLE
The proposal: Included in the proposed provisions was a change to a capital gains tax, known as a “step-up basis”. Currently, upon selling an asset, you must pay capital gains tax on the amount the asset appreciated over time. However, upon inheriting an asset, there is an exception to this rule. The basis becomes the value of the asset at the time it was inherited, not the value at the time of acquisition. Under Biden’s proposal, beneficiaries would have to pay capital gains tax immediately upon inheritance, even for assets not sold, thus accounting for what would have been lost money to the income tax system.
The dilemma: After a revolt from governmental lobbyists, the step-up repeal has been completely removed from the latest tax bill released by the Ways and Means Committee. This was a major tax loophole for the ultra-wealthy that the Biden Administration hoped to close, which now means we could see lawmakers propose other ways to replace that lost revenue.
From the beginning, this provision received intense heat from senators (Democrats included). This was mainly due to, as the author here states, the fact that it blurred the line between income taxes and estate taxes. Some Republicans even referred to the proposed change as a “death tax”, and it’s now left the Biden Administration searching for strategies to build the stability of their tax plan back up.
Bottom line: This is a HUGE win for the families we work with, and one of our biggest concerns as a firm. However, this isn’t fully going away, and it’s something to keep an eye on in the coming years.