We are thrilled to announce that Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) has joined forces with Bacchetta & Company in an exciting new partnership!

Navigating Potential Changes in Capital Gains Tax: What Business Owners and Boomers Need to Know

As a business owner or a baby boomer planning to sell your business or a significant real estate asset, understanding potential changes in capital gains tax is crucial. President Biden's FY 2025 budget proposal includes significant tax reforms aimed at wealthier taxpayers, which could impact your financial planning. While these proposals are not yet law, being informed and prepared can help you navigate potential changes effectively.

Biden's Capital Gains Tax Proposal

Currently, the capital gains tax rate for long-term capital gains—assets held for more than one year—is capped at 20%. However, President Biden's budget proposal aims to nearly double this rate to 39.6% for individuals earning at least one million dollars annually. This proposed increase is part of a broader effort to ensure that wealthier taxpayers contribute a "fairer" share of federal revenues.

Additionally, there is a separate proposal that could push the capital gains tax rate to 44.6% for those with high net investment and taxable income. This rate includes an increase in the net investment income tax rate to 5% above the $400,000 threshold, combined with an increased top ordinary income tax rate of 39.6%.

Implications for Business Owners and Real Estate Investors

If you are planning to sell a business or a large real estate asset, these proposed changes could significantly impact your tax liabilities. Here are some key considerations:

  1. Timing of the Sale: If the proposed tax increases become law, selling your assets before the changes take effect could save you a substantial amount in taxes. However, this requires careful planning and consideration of market conditions.

  2. Estate Planning: The proposal also includes changes to the "stepped-up basis" rule, which currently allows heirs to inherit assets at their fair market value at the time of the decedent's death, minimizing capital gains taxes. Under the new proposal, gains exceeding $5 million per person and $10 million per married couple would be taxed if the property is not donated to charity. This change could affect your estate planning strategies, especially if you intend to pass down significant assets to your heirs.

  3. Carried Interest Loophole: The Biden administration aims to close the carried interest loophole, which allows asset managers to treat certain compensation as capital gains rather than ordinary income. This change would mean higher taxes on this type of income, impacting those in the investment management industry.

  4. Medicare Tax Increase: Another aspect of the proposal is an increase in the Medicare surtax rate from 3.8% to 5% for individuals earning more than $400,000 annually. This increase would apply to wages, salary, and capital gains, further affecting high-income earners.

Planning Approaches

Given the potential for these changes, here are some planning approaches to consider:

  1. Consult with Our Office: Engage with our experts to understand how these proposed changes could impact your specific situation. We can help you develop strategies to minimize your tax liabilities.

  2. Evaluate Timing: Assess the timing of your asset sales. If you are considering selling a business or real estate, doing so before any tax changes take effect could be beneficial.

  3. Review Estate Plans: Revisit your estate planning documents and strategies. Consider the implications of the proposed changes to the stepped-up basis rule and explore options such as charitable donations to mitigate tax impacts.

  4. Stay Informed: Keep abreast of legislative developments. The political landscape can change, and staying informed will help you make timely and informed decisions.

The Future

While President Biden's proposed tax changes are not yet law, they signal a potential shift in the tax landscape that could significantly impact business owners and real estate investors. By understanding these proposals and proactively planning, you can better navigate the uncertainties and position yourself for financial success. Always consult with our office to tailor strategies to your unique circumstances and stay informed about legislative developments that could affect your financial planning.

Share this article...

More About Us

Get to Know Prestige Accounting Services Group (previously Prestige Wealth Accounting Group)

Offices in Flemington, NJ and Califon, NJ

Our Mission: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we are on a mission to redefine the tax experience for individuals and small businesses. With a focus on personalized service, strategic planning, and expert guidance, we aim to empower our clients to succeed financially with confidence and ease.

Expertise in Action: With a wealth of experience and a team of dedicated professionals, we specialize in individual and small business tax preparation. While we excel in all areas of taxation, our passion lies in serving the unique needs of small business owners in New Jersey. We understand that small business taxation requires specialized knowledge and attention to detail, which is why we go above and beyond to ensure our clients receive the guidance and support they deserve.

Tailored Solutions for Every Client: Whether you're a high-net-worth individual seeking comprehensive tax planning or a small business owner in need of accounting and bookkeeping assistance, we have the expertise to meet your needs. Our team takes the time to understand your specific situation and develop customized solutions that align with your goals and objectives.

Why Choose Us?: What sets us apart from other New Jersey tax firms is our commitment to excellence and innovation in the field of taxation. We don't just prepare tax returns; we provide strategic insights, proactive planning, and actionable advice to help our clients achieve their financial goals. With a team of two CPAs, an EA, and an ERO, we have the expertise and resources to deliver exceptional service and results.

Your Success is Our Priority: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we measure our success by the success of our clients. We are dedicated to building long-lasting relationships, providing unparalleled service, and helping our clients thrive in today's ever-changing tax landscape.

We can't wait for you to experience the Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) difference.

Tax & Small Business Updates

Get the latest in tax and small business updates and issues that affect your finances and growth prospects.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .
I consent to receive SMS messages

Flemington Office

Looking for tax help in Flemington, NJ? You can find us at:

Millburn Office

Looking for tax help in Millburn, NJ? You can find us at:

Califon Office