Potential Capital Gains Tax Rate Changes for Individuals

Earlier in the year, the Biden administration proposed increasing the capital gains tax rates for individuals. The proposals did not result in any proposed legislation, though the “green book” budget provided that for taxpayers with adjusted gross income higher than $1 million, their long-term capital gains and qualified dividend income tax rate would increase to the maximum income tax rate (37 percent in 2021 and 39.6 percent in 2022) plus the 3.8 percent Net Investment Income Tax. This change would be effective for gains and qualified dividends recognized on or after April 28, 2021.

While no proposed legislation has been introduced yet, we are hearing rumors that by September 15, 2021, the House Committee on Ways & Means will propose increases to the capital gains rates. It is unclear what the proposed rate will be, but it will be likely be 28 percent or higher. The date that the rate change is effective may be tied to the date that a bill is introduced in the House. There is a possibility that taxpayers with a binding commitment to sell that is in place before date of introduction will be allowed to use the current long term capital gains rates, if they close by December 31, 2021. The date of introduction of the bill will likely be no later than September 15.

Please consult your Citrin Cooperman advisor if you have any questions.