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New Biden Tax Proposal on Capital Gains, S-Corps, Business Owners and Death Tax

The Department of Treasury published new tax increase proposals for the 2025 budget. A 256-page document describing how to take more money from small business owners, retirees, heirs, high net worth individuals and corporations. Hope that this proposal will not see the light of day, as it moves America away from capitalist society into socialist society. In many cases, investment in stocks, bonds, EFTs, Real properties, oil and gas industry will carry an increased tax burden. Adding high state taxes in CA, NY, NJ and MN will put the total taxes over 50%.

Let me list a few highlights from the proposal.

1. Corporate Income tax for C corporations went from 21 to 28% with many tax implications for share buy backs.

2. S-corporation high income owner-employees will pay an additional net investment income tax (NIIT) of 3.8%. High income owners will pay a 2.9 percent Medicare tax on all employment earnings and additionally pay 12.4% on initial cap of $164k in 2024.

The reason for extra taxation is that According to current projections from the Medicare trustees, the Hospital Insurance Trust Fund will be exhausted in 2031. Increasing the NIIT and additional Medicare tax for high income taxpayers and devoting NIIT proceeds to the Hospital Insurance Fund will extend the life of the Medicare program.

3. The proposal would increase the top marginal tax rate of high earners from 37% to 39.6 percent.

4. Death tax proposal removes step bases and increases to 28%.

5. Long-term capital gains and qualified dividends of taxpayers with taxable income of more than $1 million would be taxed at ordinary rates, with 37 percent generally being the highest rate (40.8 percent including the net investment income tax).

In order to deal with the growing deficit, the government needs to find more money to cover for the expense, and taxation is one of the easier ways. Biden’s 2025 budget calls for about $5 trillion in tax increases over the next decade. Areas of focus are C-corporations, high income earners, oil and gas industry, digital asset mining, foreign income, 401k plan investments and death tax. Instead of fixing the current issues in the Medicare system or encouraging investments, we tax more and kick the can down the road.

I will cover the real estate implications of a new tax plan in the next video.

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