Presidential Tax Proposals

Presidential Tax Proposals

President Biden’s budget proposal for the 2025 fiscal years include many important tax changes. The budget provides the road map for the direction that the President wants to take in tax policy.

Lower taxes for some

• Make permanent the expanded tax credits for health insurance that were first enacted in the American Rescue Plan and extended in the Inflation Reduction Act.
• Expand the Child Tax Credit and making it fully refundable and available in advance monthly.
• Expand the Earned Income Tax Credit to cover more workers without children.
• Expand and enhance the Low-Income Housing Tax Credit, the largest federal incentive for affordable housing construction and rehabilitation.

Higher taxes for others

• Implement a “Billionaire Minimum Tax” of 25% on the wealthiest taxpayers. The tax would apply to unrealized capital gains, as well as income as ordinarily understood.
• Raise the tax rate on corporate stock buybacks from 1% to 4%, a 400% rate increase.
• New rules for Grantor Retained Annuity trusts, including requiring a 10-year minimum term and a remainder interest equal to at least 25% of the contribution.
• Payment of the income taxes of a grantor trust would be a taxable gift.
• Disallow discounts for transfers within a family of business assets.
• Limit the exclusion for Crummey power to $50,000 per year.
• Limit the exclusion from the generation-skipping transfer tax.
• Reduce the exclusion for like-kind exchanges. The exclusion has already been limited to real estate exchanges.  Under the proposal, only $500,000 of gain ($1 million for a joint return) could be deferred.
• Prevent “high income taxpayers” from converting a traditional IRA to a Roth IRA.
• Increase top tax rates. The top income tax rate would be increased to 39.7%.  For taxpayers with income over $1 million, qualified dividends and long-term capital gains would be taxed as ordinary income.

This is but a partial list of the many tax changes proposed in the budget.  The fate of these proposals is unknown at this time.

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