Thinking About Selling?

Thinking about selling your company? This may be the year for you to do it before the Biden administration gets this done:
“President Biden has proposed numerous tax increases for both the middle and upper classes. Ultimately, marginal tax rates will be rejiggered by Congress in coordination with the White House. The same, of course, is true for capital gains treatment. However, for higher earners and small businesses, most would agree that long term capital gains rates are likely to increase substantially under a Biden-Harris Administration.
Biden’s tax plan asks “those making more than $1 million to pay the same rate on investment income as they do on their wages.” The capital gains tax is a fee that the government imposes on profits made from the sale of assets like real estate, stock, the sale of businesses, collectibles, and other assets with increased value—the “gain.” A capital gain occurs where the asset’s total sale price is greater than the asset’s original cost. By contrast, a capital loss occurs when the total sale price is less than the original cost.
Capital gains taxes become due when you sell your investment. For example, if you own a rental property that has increased significantly in value over the years of your ownership, you will not owe a capital gains tax during those years of ownership. However, once you sell the property, you must report the profit on your tax return and pay a tax at your income bracket’s capital gains rate. As you will note, capital gains taxes are often a form of double taxation in that you will have paid taxes annually on all income derived from the asset (assuming it is an income-producing asset) and you will be taxed again (at the federal and, most likely, also at the state level) when you sell the asset.
Currently, an individual earning between $0 and $40,000 pays a 0% long-term capital gains tax. An individual earning between $40,000 and $441,450 pays a 15% long-term capital gains tax, and an individual earning more than $441,450 pays a 20% long-term capital gains tax. Earned income for each of these brackets includes the sale proceeds of the asset. And added to each of these tax rates is the 3.8% Affordable Care tax surcharge (known to many as the “Obamacare Tax”).
As a candidate, Biden claimed that, for individuals and small businesses earning less than $1 million, capital gains tax rates would not be affected under his presidency. However, Biden proposed to increase the 20% capital gains tax rate from 20% (plus the 3.8% surcharge) to a whopping 37% (plus the surcharge) for a total federal capital gains tax rate of 40.8%.”