Bloomberg News reports that President Biden’s coming tax package, as expected, will propose ending the step up in basis at death. The article begins as follows:
President Joe Biden’s coming tax package will feature an end to a major benefit for wealthy estates that drastically minimizes the levy for inheritors, along with a bump up in the top income tax rate and funding for strengthened IRS auditing, according to a person familiar with his proposal.
Ending “step up in basis,” which allows heirs to use the market value of assets at the time of inheritance rather than the actual purchase price as the cost basis for capital gains when the holdings are sold, would mean much higher tax bills for wealthy estates. Congressional Democratic proposals have exempted a share of assets from tax — one Senate plan provides for $1 million — but the specifics of Biden’s measure aren’t yet clear.
Biden’s plan will also include a top individual tax rate of 39.6% for those making at least $400,000, up from 37% today, according to the person, who spoke on condition of anonymity as the proposals aren’t yet public. That could affect roughly 1% of taxpayers if current income thresholds apply. The person didn’t say whether the $400,000 is also the figure for married couples filing jointly.
Biden’s measures will include $80 billion to boost the Internal Revenue Service’s audit capabilities over the next decade for wealthy individuals and corporations, a change that could generate $700 billion in revenue, according to the person. The administration has already asked for more money for enforcement in its outline for the 2022 annual budget.
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.