Other Transfer Tax Proposals
Some of the other proposed changes to the transfer tax include:
• Returning the estate, gift and generation-skipping transfer tax exemptions to $5 million, adjusted for inflation, as of January 1, 2022, rather than January 1, 2026
• Eliminating valuation discounts for nonbusiness assets held in an entity, effective on date of enactment
Personal Income Tax Proposals
The proposed legislation also includes many changes to the personal income tax, including:
• Returning the top individual income tax bracket to 39.6% for those with income of more than $400,000 (single) or $450,000 (married filing jointly), effective for tax years after December 31, 2021
• Increasing the tax rate on long-term capital gains to 25% for those with income of more than $400,000 (single) or $450,000 (married filing jointly), effective September 13, 2021
• Imposing a 3% surtax for those with income of more than $5 million (married filing jointly) and trusts with income of more than $100,000, effective for tax years after December 31, 2021
• Increasing minimum required distributions and imposing new contribution limits for retirement accounts that exceed $10 million for those with income of more than $400,000 (single) or $450,000 (married filing jointly), effective for tax years after December 31, 2021
These are just a few of the current legislative proposals and, at this point, it is impossible to know whether, how much, or in what form any of the proposals will be enacted. It is important for clients to talk with their qualified tax and legal advisors about the impact of these provisions on their overall planning.
Theresa Marx is a senior wealth strategist for CIBC Private Wealth Management in Chicago and provides estate and financial planning services to high-net-worth clients.