• Lavina Nagar

Rip Van Winkle reversed - Tax changes for individuals in revised economic package

Updated: Oct 30, 2021



In our recent meetings with clients, we have been talking a lot about the potential tax changes that Congress might be sending our way. However, negotiations on Capitol Hill on October 28 has resulted in a slimmed-down economic package. And I almost feel like a reverse Rip Van Winkle - for months we have been going through these myriad possibilities, then we wake up one day and find we are where we had started!


The original bill would have affected investors tax liabilities on income, capital gains and estate. Almost all these changes that would have impacted investors have been dropped from the bill. If the bill passes, most individuals should see no tax increases.


Some of the tax changes that are out are:


  • Income tax top rate increase from 37% to 39.6% for individuals over $400,000 in income

  • A new higher rate on capital gains and dividends of 25% for individuals with more than $400,000 in income

  • Roth IRA conversions of traditional IRAs

  • Roth IRA conversions of employer-sponsored plans

  • Decrease amount of inherited assets exempt from the estate tax from the current level of $11.7 million to about $6 million

  • Stepped-up in basis at the time of death


The revised proposal has yet to be passed by both the House and the Senate, so more changes may be coming. However, changes that would have had a greater impact on an average investor, are off the table now.


Lavina Nagar, CFP®

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