President Biden has formally suggested the highest top capital gains tax rate in over a century.
According to the proposal, the top marginal rate on long-term capital gains and qualified dividends would rise to 44.6%. This could significantly impact the financial returns of investors in stocks and crypto.
Biden’s proposed capital gains tax hike. Source: Americans for Tax Reform
In many states, the combined federal-state capital gains tax under Biden’s plan would exceed 50%.
Additionally, the capital gains tax is not adjusted for inflation, which adds another layer of complexity to the proposed tax increase.
Capital gains taxes often result in double taxation, mainly from investments in stocks, stock mutual funds, or stock ETFs. This tax is an additional layer on top of the current federal corporate income tax rate of 21%.
How will gains from stock be impacted?
Currently, the capital gains tax rate for long-term investments, assets held for over a year, tops at 20%.
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