The “American Families Plan,” a proposed tax bill, passed out of the U.S. House of Representatives’ Ways and Means Committee on September 13th, and could impact you, if it passes.
The bill may change but many of its features are likely to become law. Although acts of Congress are hard to predict, here is an introduction to some of the key points. Whether or not the bill is passed as is, or even if no bill becomes law, it makes sense to understand what might happen.
Tax Related Proposals
- The top marginal income tax rate would increase to 39.6% from 37%. This applies to single filers with taxable income over $400,000, married individuals filing jointly with income over $450,000, and married individuals filing separate returns with income over $225,000.
- The top capital gains tax rate would increase to 25% from 20%. This applies only to those same high-income taxpayers; it covers all sales settling and transactions closing after September 13, 2021.
- “Back-door” Roth IRAs would be eliminated for those same high-income taxpayers. The bill prohibits Roth Conversions from IRAs and 401(k) plans for single filers making over $400,000, joint filers over $450,000, and head of household filers over $425,000.
- The Child Tax Credit expansion would continue through 2025. Additionally, changes to the Earned Income Tax Credit (EITC) and the Child and Dependent Care Tax Credit (CDCTC) would become permanent.
- The federal estate tax exemption would be reduced to $6,020,000 in 2022. For 2021, it stands at $11,700,000. This accelerates a sunset that was scheduled to occur in 2025.
As part of our dedication to our clients, our planners at ZWM are continuously monitoring the situation and preparing to help you plan for these changes.If any of the measures in the proposal pass and impact you directly, you either have heard or will hear soon from us. And as the situation clarifies, we will reach out to you to advise you through the transition. Until then, please feel free to give us a call or send us an email with any questions or concerns.