Daily Update from Wouch Maloney - CPA in Horsham & Philadelphia

Tax Increases and Tax Credits Listed in American Families Plan

On April 28, 2021, the White House released a Fact Sheet: The American Families Plan, which contains tax changes regarding increases and extensions of tax cuts.

Highlights of the tax increases include:

  • Increase the top tax rate to 39.6%.
  • Capital gain rate threshold is 39.6% for high earners.
  • Reduction in the step-up in basis at death for some taxpayers.
  • The plan would end the practice of “stepping-up” the basis for gains in excess of $1 million ($2.5 million per couple when combined with existing real estate exemptions) at death and would tax the gains if the property is not donated to charity.
  • The reform will be designed with protections so that family-owned businesses and farms will not have to pay taxes when given to heirs who continue to run the business.
  • Cut into the rule for like-kind exchanges.
  • The plan would eliminate the like-kind exchange rule with respect to gains greater than $500,000 on real estate exchanges.
  • Close loopholes in the 3.8% net investment income tax.
  • Certain unearned income of high-earner individuals, estates, and trusts is subject to a surtax of 3.8%.
  • Change taxation of carried interest.
  • Make the excess business loss rules permanent.

Highlights of the extended key tax cuts include:

  • Child Tax Credit
  • Earned Income Tax Credit
  • Child and Dependent Care Tax Credit (permanent increase)
  • Expanded Health Insurance Tax Credits (ACA premiums tax credits)

The proposed measures are to ensure that no one making $400,000 per year or less will see their taxes go up. Finally, it is not clear if all or just some of the changes listed in the American Families Plan are permanent.

To read the Fact Sheet: The American Families Plan in its entirety, please click here.

Questions? Should you have questions about this topic, or any other topics related to your personal or business situation, please contact us at any time.

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