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Once again, our nation is confronted with more proposed changes to current income tax laws, and many will not be favorable to taxpayers. The administration and the House Ways and Means Committee have presented a look at what is potentially to come. While most of these laws could be enacted by January 1, 2022, some of the new changes could be enacted as early as the day after their proposal date of Sept 13, 2021.

2022 Budget Reconciliation Plan

The US Senate approved a $3.5 trillion federal budget in August of 2021 that proposed several tax changes which they intend to use for funding this federal spending. These are some of the provisions being proposed through the current budget reconciliation process that could affect individual tax rates:

  • Capital Gains – Increase from rate of 20% to 25% for long-term. Some capital gains could qualify for up to 39.6%, and in some circumstances, could raise to a cumulative 43.4%. With state income taxes, that rate could rise to over 50%. This applies to gains as of September 14, 2021.
  • Federal State & Gift Tax  Reduction from current $11.7 million in free gifting to the 2010 rate of $5 million. With inflation adjustment, it could be $6 million and kicks in on January 1, 2022.
  • End of Real Estate Tax Deferments – The American Families Plan would end deferrals of gains over $500,000.
  • Income Tax for Grantor Trusts – Unlike the previous rule of allowing a grantor trust to retain trust tax status, sales from a grantor will now be treated as regular gains income.
  • Increased Individual Tax Rates – Top marginal income tax rate of 39.6% for individual income over $450,000, heads of household over $425,000, unmarried individuals with $400,000, marrieds filing separate over $225,00 and estates /trusts over $12,500. Effective starting January 1, 2022.
  • Aggressive Enforcement of Non-compliance – Allotment of $80 billion toward IRS enforcement of tax laws and penalties for the next 10 years.
  • Small Business Taxes – Raise C-Corp tax for owners from 21% to 28%. Require a 3.8% Medicare tax on S-Corp owners for all income over $400,000 as opposed to the current exemption for non-salary income reported on the K-1.

Don’t Wait to Plan Your 2021 Filing Strategy

With constant addendums and adjustments to tax laws during the pandemic and its aftermath, alongside administration transitions, filing your 2021 income taxes could be a daunting challenge. Synergi Partners works hard to stay on top of proposed changes to current income tax laws so our clients are prepared and ready to file. Let us help you obtain your most favorable income tax filing outcomes by contacting us for guidance. Don’t wait until filing time comes! There may be actions you can take now to protect assets that may be affected by these tax changes. Contact us today for a free consultation regarding your 2021 tax filing.

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