This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: Capital Gains and Capital Pains in the House Tax Proposal
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > Capital Gains and Capital Pains in the House Tax Proposal
Markets

Capital Gains and Capital Pains in the House Tax Proposal

Editorial Board Published October 1, 2021
Share
Capital Gains and Capital Pains in the House Tax Proposal
SHARE

It hasn’t been noticed much, but proposed changes to capital-gains taxes have good news for some of the highest-earning Americans and bad news for those earning between $400,000 and $1 million.

Contents
Watch and waitGamble on good newsPrepare to manage large gainsSHARE YOUR THOUGHTSMaintain perspective

The good news, for the highest earners: The House Ways and Means Committee didn’t adopt the Biden administration’s proposal to raise the top rate on long-term capital gains to 43.4% for people with income of $1 million or more. That would have been a huge increase over the current top rate of 23.8%, which consists of a 20% rate plus a 3.8% surtax for many. (Long-term gains are those on sales of assets held longer than a year.)

Instead, the House tax writers proposed raising the 20% rate to 25% and retained the 3.8% surtax, bringing it to 28.8%. They also added a 3% surtax for those with income of $5 million or more, but that will affect few Americans.

But here’s the rub: The proposed 28.8% rate would kick in at $400,000 of taxable income for single filers and $450,000 for married joint filers. That’s around $50,000 below the thresholds for the current 23.8% top rate, which are $445,851 for single filers and $501,601 for married joint filers.

This is the bad news for people with income in the $400,000 to $1 million range—even if it’s from a one-time windfall like the sale of a home or business.

For many sellers of small businesses, the rate on part of their gain would rise to 28.8% from 15%, according to Matt Foltz, a manager with Chicago-area wealth-advisory firm BDF who works with small-business owners. Owners who are active in their firm typically haven’t owed the 3.8% surtax on a gain from a sale, but another provision in the House bill would apply it in some cases, beginning next year.

This is a complex area. But Mr. Foltz estimates an owner with about $150,000 of annual taxable income from a business who sells the company for $1 million of capital gain could owe $245,000 of capital-gains tax and surtax under the Ways and Means bill. That is versus $182,000 under current law.

These owners often have scant retirement savings because they have reinvested profits in the business, adds Greg Will, a planner at Bestgate Wealth Advisors in Maryland.

“The capital-gains tax increase meant for the ultrawealthy could have a substantial impact on the retirements of middle-class business owners,” he says.

The proposed increase could also raise taxes for sellers of long-held homes in expensive areas like Boston, New York City and San Francisco. It would kick in if gains exceed the home-sellers’ exemption of $250,000 for single filers and $500,000 for married joint filers and the sellers’ total taxable income is above the $400,000/$450,000 thresholds.

Charlie Oppler, a longtime broker based in Ridgewood, N.J., and current president of the National Association of Realtors, says many of his firm’s clients have annual income well below $400,000 and gains on home sales far greater than the exemptions.

“I was surprised the Ways and Means bill reached so far below the president’s $1-million limit,” he says. “It would especially hit widows and widowers who only get a $250,000 exemption.”

The tax-rule change would take effect for transactions after Sept. 13, the date the proposal was introduced, unless the seller had a binding contract by then. (There are often such cutoffs with capital-gains changes, to prevent gamesmanship.)

What can affected taxpayers do, beside talking to lawmakers or trade associations? Here are options to consider.

Watch and wait

Neither the full House nor the Senate has acted on the Ways and Means provisions; there could still be major changes.

For example, lawmakers could help home sellers by moving the proposed thresholds higher. Less likely is an expansion of the $250,000/$500,000 exemption, which was enacted in 1997 and isn’t indexed for inflation. They could even ditch the Ways and Means proposal, as the House tax writers seem to have done with the administration’s proposal to tax capital gains at death.

Gamble on good news

It’s possible, if unlikely, that lawmakers will delay the Sept. 13 effective date. Sellers who have acted by any new cutoff date could be eligible for the prior rates.

For example, President Biden’s April proposals said that sellers with income of $1 million or more would face a top rate of 43.4% after the introduction date. Yet some who sold after that lucked out, as sales on or before Sept. 13 now qualify for a 23.8% top rate.

Prepare to manage large gains

If Congress lowers the thresholds for capital-gains rates, consider spreading out gains to avoid higher brackets.

Meg Bartelt, an adviser with Flow Financial Planning near Seattle with many clients who are women in tech, says they often earn less than $400,000 a year but have company stock. While a $1 million capital-gains threshold wouldn’t complicate planning for most, a $400,000 threshold would.

These investors may want to take gains this year, if it helps them stay below a $400,000 or $450,000 threshold in the future.

SHARE YOUR THOUGHTS

How are you preparing for potential changes in your 2021 tax bill? Join the conversation below.

“There may be no downside to accelerating a planned sale if it doesn’t raise their tax rate this year and saves them from a higher one next year,” she says.

Home sellers can’t spread out gains, but they could avoid taking other gains in the year of a sale. They can also research every dollar spent on home improvement, as such expenses can lower taxable gains by raising the home’s cost basis.

Charitably minded investors with large one-time gains may want to bunch several years of deductions to lower taxable income, perhaps in a donor-advised fund.

Maintain perspective

Taxes affect investment returns, but they’re only one factor. Jody King, director of wealth planning at Boston’s Fiduciary Trust, is adamant: “An investment thesis, not taxes, should drive a sale.”

Or as the adage says: “Never let the tax tail wag the dog.”

Write to Laura Saunders at [email protected]

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article Democrats Delay Vote on  Trillion Infrastructure Bill Democrats Delay Vote on $1 Trillion Infrastructure Bill
Next Article As Selling Luxury in China Gets Tougher, Buy American As Selling Luxury in China Gets Tougher, Buy American

Editor's Pick

Nicki Minaj Calls Cardi B’s Daughter ‘Ugly’; Cardi Shoots Again That Nicki’s Son Is Nonverbal Because of Drug Use Throughout Being pregnant

Nicki Minaj Calls Cardi B’s Daughter ‘Ugly’; Cardi Shoots Again That Nicki’s Son Is Nonverbal Because of Drug Use Throughout Being pregnant

Studying Time: 3 minutes The Nicki Minaj vs. Cardi B beef has been occurring for years. Like, mainly for so…

By Editorial Board 4 Min Read
French Impressionism from Museum Langmatt on the Belvedere
French Impressionism from Museum Langmatt on the Belvedere

From 24 September 2025 to eight February 2026, the Belvedere presents the exhibition…

2 Min Read
Nicole Kidman and Keith City: Wow! It is Over After 20 Years!
Nicole Kidman and Keith City: Wow! It is Over After 20 Years!

Studying Time: 3 minutes We’ve obtained a tragic shocker out of Hollywood:…

4 Min Read

Oponion

It’s fascinating to observe Trump supporters understand they screwed up

It’s fascinating to observe Trump supporters understand they screwed up

That is an occasional roundup of people that voted for…

May 10, 2025

DSCC declares large TV advert purchase concentrating on Cruz, Scott in Texas, Florida

The Democratic Senatorial Marketing campaign Committee…

September 28, 2024

Republicans refuse to let Democrats off the hook as lawmakers reframe messaging amid surging crime

Skyrocketing crime in cities nationwide was…

February 9, 2022

Palantir’s Revenue Growth Slows as U.S. Government Delays Contracts

Palantir Technologies Inc. said it expects…

August 8, 2022

Firefighters query leaders’ function in Washington immigration raid

Wildfire veterans consider prime officers on…

September 4, 2025

You Might Also Like

Traders have fun Japan’s ‘Iron Lady’ election win
Markets

Traders have fun Japan’s ‘Iron Lady’ election win

Federated Hermes CIO Stephen Auth weighs in on Japan's first elected feminine prime minister and provides an concept on what…

3 Min Read
Tesla teases Tuesday announcement with social media movies
Markets

Tesla teases Tuesday announcement with social media movies

Niles Funding Administration founder and portfolio Dan Niles discusses Tesla’s potential $1 trillion compensation plan for Elon Musk on ‘The…

5 Min Read
Gold FOMO may push steel to ,000
Markets

Gold FOMO may push steel to $4,000

Pacer ETFs President Sean O’Hara discusses the advantages of ETFs and lays out his favourite investments on ‘The Claman Countdown.’…

3 Min Read
OpenAI turns into world’s most respected non-public firm with 0B valuation: report
Markets

OpenAI turns into world’s most respected non-public firm with $500B valuation: report

OpenAI CFO Sarah Friar joins Mornings with Maria to debate main investments from NVIDIA, SoftBank, and others, the U.S.–China AI…

5 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?