President Biden’s proposed Budget for the Fiscal Year 2024 seeks to promote expanded access and improved affordability in healthcare and education while cutting taxes for low-income families and shrinking the deficit, but the proposed funding comes from increasing taxes on the wealthy and eliminating an important tax break for real estate investors, which will likely be rejected outright by many in Congress.
Depending on your politics, you might have different solutions to taxes. Many might suggest that changing the tax code to be less advantageous for the wealthy is more complicated than you might think. In this case, Biden’s proposal may unintentionally harm middle-class families in the process, research suggests.
This article takes a look at how this proposal to the tax code could affect real estate investors, in particular.
Raising Taxes for the Wealthy
The proposed budget would increase taxes on wealthy Americans in several ways. For example, it would:
- Increase the capital gains tax rate from 20% to 39.6% for people earning at least $1 million in any year
- Increase the Obamacare tax rate from 3.8% to 5% for people with incomes of at least $400,000
- Levy a minimum 25% tax rate for the wealthiest 0.01%, or households worth $100 million or more
- Increase the tax rate on personal income from 37% to 39.6% for people who earn at least $400,000, reversing a previous tax cut
- Place restrictions on the maximum contribution to Roth IRA accounts for people who earn at least $400,000
- Removes the step-up in basis for inheritances at death, affecting unrealized capital gains greater than $5 million ($10 million for joint filers)
It’s important to note that while the effective tax rate for the top 1% has decreased since the 1970s, it’s still more than eight times higher than the average effective tax rate for the bottom half of earners, according to the Tax Foundation. But since the federal government spent $1.38 trillion more…