You would not be affected. Your capital gains on the house are not the $1M you are selling for. Your cost basis is $575K. Selling for $1M, your capitol gains are $425K. The proposed change in capitol gains will not affect you at all. You would be taxed at the same rate before and after the proposed change. The top bracket that is being affected current starts around $518K for single filers and around $582K for MFJ filers. You would be taxed at 0% for the first $92K and then at 15% for the rest (essentially $50K). And as a rental, you can also deduct costs that you made the improve the property during the period that you rented as long as they were not cosmetic (e.g. paint and carpeting do not count). So, you will be clearing much more than you think. The new proposal makes zero change to your situation. |
. That’s not entirely true. Many of these high earners are self employed and they still pay the employer side on the FICA taxes on their entire income. These law firm parters that I do taxes for (making $2-10M+) pay an effective tax rates in the 40-50% including Fed, state and FICA taxes. |
Not necessarily true. You ignored recapture. The capital gains income is stacked on top of this so it can push it into a higher bracket. If this personal has even a 200k in wage income it can easily impact them. |
Just a reminder that if your house is worth twice what you paid and put into it, the increased value is not something you did, but is largely due to government actions. People want to buy your house because there are great public schools, access to quality healthcare, wee-managed public infrastructure, transportation, public parks, zoning and environmental laws that keep out noisy, smelly, polluting, and hazardous industries, and so on. |
Yup. Exactly. |
Not so easy to give up your US citizenship and attain new citizenship. Your example of Switzerland requires that you have resided in Switzerland for 10 years, 3 of which must be the most recent years before your application. Until that time, you have to continue to retain your US citizenship and will be required to file your US taxes. You'll be able to deduct any taxes that you pay to your country of residency, but you will still have to pay your US taxes. In Singapore, it's a little easier. You have to work in Singapore at least 6 months to apply for and get an Employment pass. Note that if you work for a multinational company, the company has to file that your job is located in Singapore. So corporate execs and other wealthy people who do not work in an office in Singapore, do not qualify. Once you've had your employment pass and have worked for at least 6 months, you can apply for permanent residency which can take some months to process. After you have your permanent residency granted, then you have to live for 2 years in Singapore. You have to live in Singapore for 3 years, 2 of which must be the most recent 2 years. Then you can apply for citizenship. The entire process takes about 4-5 years depending on processing speed. Rich people can likely make the process go closer to 4 years than 5 years. But during this time you need to continue to pay US taxes. So, the wealthy will have to play the long game and hold onto their capitol assets while they establish residency and citizenship in foreign countries if they want to do that. It may be worthwhile for the uber-wealthy (say the top 0.1%), but will not be reasonable for the affluent like the top .1%-1%. |
Oh come on. Are people this naive.
This budget is a model budget the same way republicans out out a model budget that effectively eliminates all social service programs. No one, including the person who submits them thinks it has any chance at ever becoming law. It’s intentionally put out there as a talking point only. |
This is annoying to me because DH and I fall into the impacted MCJ category and we are W2 earners (with some investments), little kids, almost done paying off student loans for bschool, living in a very HCOL area so we can use those bschool degrees, and then SALT is repealed and now this. And we have friends who make $250K, live in $2.5M mortgage free homes from mom and dad, and use trust funds to pay for private school and nannies. I will absolutely vote Biden for prez because I care about democracy and the environment but I find this type of proposal frustrating. Making $600K or $700K is a lot but when you are paying off loans, paying for kids, living in a HCOL area because that is where you need to live to get jobs that allow you to make that money a proposal like this and the repeal of SALT just hit really hard. I wish there were more blue dog democrats. |
This makes me feel better. Every time I see a headline like “Bezos pays no income tax” it makes me frustrated. Can’t we take away the numerous tax loopholes that only very wealthy people know about and are able to use before we tax every couple making over $582K way more? |
Just FWIW, it was Republicans, not Democrats, who capped (not repealed) the SALT deduction, as a way to cut the overall cost of the 2017 Trump tax cuts. |
You sound like Dr. Evil when he asks for a $1M ransom to save earth. It’s not a lot of money anymore, especially when the cost of nursing homes can easily hit $70-90k for full time care. Basically, $1M is about five years of living for two people moving because of age limitations. And that’s before tax. Not exactly a great way to reward people for staying off the government’s teat. It puts them in line for future assistance. Then again, maybe that’s what Biden wants. |
A recent article showed how it’s so expensive to live in DC Metro that $100k goes as far as $50k. Pair that with student loans and the chaotic public’s schools that require parents to lean on private if they can and…voila. $400k gets you a coke and a hot dog at Nats stadium. NOT a SFH. |
It’s a wealth tax. We need it. Not only to fund the government, but to address the social ills of too much wealth inequality. And, don’t start with “I worked hard for my money. You’re going to kill initiative in this country.” The people who will be impacted by this are not working hard, period. And those who have initiative will work hard despite this tax. Taxes have been much higher in the past, and the world didn’t stop. |
Bad policy created by Washington DC is what is creating social ills in the first place. |
Wish this would apply only to non-primary residences. What we really need is to control is Air BnBs and corporate investing in residential homes. |