President Biden unveiled his $2.3 trillion infrastructure plan; now the focus turns to how the Administration proposes to pay for all (or some of) the measures.  While these plans are still subject to significant change, below are key proposals that relate to individuals that we are watching to see if they make it into final legislation:

  1. Increase the top ordinary income tax rate from 37% to 39.6% for income over $400,000.  It is unclear whether that is individual or joint.
  2. Eliminate the step-up in cost basis at death.
  3. Replace deductions for contributions to IRAs, 401(k)s, and similar retirement accounts with a flat 26% tax credit.
  4. Increase long-term capital gains rates from 20% to 39.6% on income over $1,000,000.
  5. Decrease the unified gift and estate tax exemption amounts from $11.58M to $3.5M for individuals and $23.16M to $7M for married couples.
  6. Reduce the maximum amount of itemized deductions to no more than 28% for those earning over $400,000.  It is unclear whether that is individual or joint.
  7. Eliminate tax-deferred Section 1031 real estate exchanges.

We continue to keep an eye on these proposals and can discuss how the final bill will impact your portfolio and planning strategies when that time comes.  If you have questions or concerns, please reach out.