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Today we’re talking about the recent proposals in the new American Families Tax Proposal. We’ll walk you through some of the proposed changes and how they could affect your financial future.

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Show Notes

Democrats released their new American Families Tax Proposal recently, so we wanted to walk you through some of their ideas and how they could affect you if these changes pass.

Most of the proposals are focused on taxpayers who make in the $400,000 to $500,000 income range or higher. But there are some strategies that are being eliminated for taxpayers who make below those amounts.

Some of these changes could change your taxes immediately in 2021. Some would take impact in 2022, and some would take effect in the next 10 years. It’s important to remember these proposals are not final, but it’s important to be prepared.

We’ll break this down into four categories – changes to income tax rates and capital gains rates, changes to retirement planning saving and investments, changes to required minimum distributions, and estate planning changes, and other miscellaneous changes.

Income tax and capital gains

One of the changes would make the top ordinary income tax rate 39.6% in 2022. That was previously reduced to 37%. They’re looking to reduce the threshold of where this bracket would start.

If you’re a single filer, the top bracket starts at $523,000. The proposal would start it at $400,000. Married filing jointly started at $628,000. The proposal would start at $450,000.

They are also looking to raise the top capital gains rates. The new proposal would go from 20% to 25%. The threshold would start at $400,000 for single filers and $450,000 for married filing jointly.

Read more about the plan: https://www.kitces.com/blog/biden-american-families-plan-bill-proposed-increase-tax-capital-gains-retirement-reform/

To hear about the other changes listen to the full podcast or use the timestamps below to jump to a specific section. 

[4:16] – Income taxes

[6:51] – Capital gains

[8:21] – S-Corp

[9:57] – Ultra-high income earners

[11:27] – Retirement planning changes

[12:45] – Conversions

[14:02 ]– Investment strategy change

[15:05] – RMDs

[18:19 ]– Miscellaneous proposals

Thanks for checking out this episode. We’ll talk to you again soon.

“Some of these changes could change your taxes immediately.”

-Scott Sierens