Biden wants to step down the ‘step-up’ on investment gains 

A landmark proposal in President Biden’s newly announced American Families Plan would end the long-standing tax exemption for investment appreciation when a taxpayer dies. This break is known as the “step-up in basis,” and changing it could raise taxes at death significantly for affluent Americans, The Wall Street Journal reports. 

Under Biden’s proposal, the untaxed gains on investments held at death—such as stock, land, or a home—would likely be taxed at a top rate of 39.6%, above an exemption of $1 million per individual, plus $250,000 more for a home. For married couples, the total exemption would be doubled, to up to $2.5 million of gains.

This is a big shift: Currently the income tax rate on such investment gains is 0%, although estate tax of up to 40% may apply to the full asset value if an individual has more than $11.7 million of assets at death for 2021. (Biden’s proposals don’t call for revisions to the estate tax, at least for now.)

The step-up saves taxpayers more than $40 billion a year, according to the congressional Joint Committee on Taxation. The new proposal would take back some of that to help pay for social programs, and it would be a profound change to a provision that has been in the tax code for 100 years. Tax specialists expect intense opposition. Read the full story.