Should Taxpayers Accelerate Capital Gains on Assets they will Retain? Tax Planning in Anticipation of Rate Increases
On April 28, 2021, the White House released a tax proposal as part of the American Families Plan, which would significantly increase the capital gains tax rate. In addition to this proposed increase, House Ways and Means Committee member Bill Pascrell, Jr. introduced H.R. 2286, and a Senate proposal, the Sensible Taxation and Equity Promotion (STEP) Act, would tax unrealized capital gains at death.
While it is premature to assume that the proposed capital gains rate increase and elimination of the step-up basis upon death will become a part of legislation that is enacted into law, now is the time for proactive taxpayers to have a conversation about the possible changes.
In the May/June 2021 issue of the Nebraska CPA, linked below, Jeff Schaffart and Nick Bjornson review these proposals and why taxpayers, with significant capital gains in assets they desire to retain, may wish to consider accelerating those gains to lock in the current capital gains rate and potentially owe a lower total tax liability.