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LSUFanHouston
LSU Fan
NOLA
Member since Jul 2009
26212 posts

Latest House Markup re: income taxes
I know there has been a lot of angst on this board concerning federal tax increases. The following is what I gather is the current house plan. I haven't found a good article that really covers all of this... so this comes from multiple sources.

Step-up basis to have no changes.

Ordinary tax rates to go up to 39.6% on incomes over 400K/450K. (single/married).

3% surtax on AGIs over $5M (not yet clear if the surtax base is AGI or taxable income)

LT Cap Gains rate to increase to 25% from 20%, retroactive to Sept 13 (not April)

No Change to SALT cap

The 2026 sunset to estate and gift exemptions would instead occur in 2022... making the 2022 level 5.5M / 11 M adjusted for inflation

Corporate tax rates would move to a three rate system - 18% / 21% / 26.5%

But the "big" news is some changes to higher-balance retirement accounts. Since these are new concepts... I expect them to change. Currently these only apply if your AGI is 400K/450K or more.

1) If combined IRA/401K balances are over $10M at end of prior year, no new IRA contributions allowed in current year (for Roth or Traditional... no contributions at all... not even nondeductible ones). While the 10M balance includes 401K plans, the bill does not currently prevent 401K contributions... nor does it discuss rollovers.

2) If your combined IRA/401K balance is between $10M and $20M at end of prior year, you will have an RMD of half the excess of $10M, regardless of age.

3) If your combined IRA/401K balance is greater than $20M at the end of prior year, you will have an RMD of 100 percent of the excess of $20M, or your entire Roth balance, whatever is less.

That's the high points.


frogtown
Georgia Fan
Member since Aug 2017
993 posts

re: Latest House Markup re: income taxes
Thanks for the update. This is appreciated.


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MSTiger33
LSU Fan
New York City
Member since Oct 2007
17095 posts

re: Latest House Markup re: income taxes
One of the biggest issues is neutering grantor trusts. Estate planning attorneys better put a pot of coffee on and refill their adderall for Q4. They are going to be busy.


LSUFanHouston
LSU Fan
NOLA
Member since Jul 2009
26212 posts

re: Latest House Markup re: income taxes
quote:

One of the biggest issues is neutering grantor trusts. Estate planning attorneys better put a pot of coffee on and refill their adderall for Q4. They are going to be busy.


I thought about adding a comment about that but I decided that might be a little too nuanced / too specific for this board.

But yes... Trust attorneys about to make some coin in Q4...


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MusclesofBrussels
Member since Dec 2015
3565 posts

re: Latest House Markup re: income taxes
I posted this in the other thread but moving here because seems like you would know. Am I understanding this correctly?

I am probably misunderstanding the proposed changes to the top income tax bracket, but it doesn't seem logical to have it apply to individuals over 400K but married couples over 450K. There's a significant difference between an individual at 400K and a couple at 450K. Heavy marriage penalty.


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GeneralLee
LSU Fan
Member since Aug 2004
11533 posts

re: Latest House Markup re: income taxes
Killing Backdoor roth conversions if you are in the 39.6% bracket is a huge deal for many of this board, while the $10M Roth IRA/401K balance won't hit as many of us.


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