As tax filing season wraps up, we find many clients asking, “What will my tax bill look like next year?” We certainly don’t pretend to know what Congress will do, but the White House released a fact sheet for the American Families Plan (AFP). We found the following summary prepared by the Tax Foundation helpful.
The AFP would fund $1.8 trillion of increased spending on educational and childcare-related policies by increasing the tax burden on high-income individuals and pass-through businesses. It would:
- Raise the top marginal tax rate on individuals to 39.6 percent from 37%
- Apply ordinary income tax rates, including the proposed 39.6 percent rate, to capital gains income of individuals with more than $1 million in taxable income.
- Tax unrealized capital gains at death with a $1 million exemption for single filers and $2 million exemption for joint filers, with additional exemptions for certain types of assets.
- Apply the 3.8 percent net investment income tax to all income above $400,000, including active pass-through income.
- Make permanent the 2017 tax law’s 463(I) limitation on pass-through businesses’ losses above $250,000 for single filers and $500,000 for joint filers.
- Limit 1031 Like-Kind Exchange deferral for gains above $500,000.
- Tax carried interest as ordinary income.
- Increase individual tax enforcement and enact new reporting requirements for financial institutions.
The proposed American Families Plan would extend and make permanent the American Rescue Plan’s expansions. It would:
- Extend the enhanced Child Tax Credit of $3,600 for children under 6 and $3,000 for children age 6 through 17 through 2025.
- Make permanent full refundability of the Child Tax Credit, eliminating the income phase-in of the credit.
- Make permanent the near tripling of the Earned Income Tax Credit (EITC) for workers without qualifying children, including doubled phase-in and phaseout rates and higher phase-in and phaseout income levels.
- Make permanent the expanded Child and Dependent Care Tax Credit (CDCTC), which covers up to 50 percent of qualifying childcare expenses up to $4,000 for one child and $8,000 for two or more children.