Homework answers / question archive / Capital gain tax- Discussion For this assignment present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client

Capital gain tax- Discussion For this assignment present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client

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Capital gain tax- Discussion For this assignment present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client. Capital gain tax: For taxpayers whose income exceeds $1,000,000, capital gains may become taxed as ordinary income rates. Under the current draft of the full proposal, they would nearly double from 23.8% to 43.4% when accounting for the Net Investment Income Tax (Links to an external site.) of 3.8%. While the increase in the capital gains rates may end up landing around the 25% to 28% range based on the political climate, there is still an expectation that rates will increase. Estate planning - discussion - 3 For this assignment present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client. Estate planning: Estate taxes may affect more taxpayers, as proposals suggest reducing the per person estate-free lifetime limit from $11.7 million to as low as $3.5 million per person. Other plans accelerate the ‘sunset’ that will occur in 2026 under current law, which reduces to $5 to $7 million. Additionally — and perhaps more impact fully — as proposed, death will be considered a taxable transfer event where cost basis is no longer ‘stepped-up’ but rather all unrealized gains are recognized as death. Retirement savings changes-Discussion - 2 For this assignment present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client. Retirement savings changes: Under current law, taxpayers do not pay any tax on contributions to pre-tax retirement plans. A new proposal would replace the deduction with a 26% credit. In effect, lower-income earners (those in brackets lower than 26%) would reap a higher benefit by contributing to pre-tax retirement accounts by receiving 26 cents per dollar of contribution. Conversely, higher-income earners may have to begin paying tax on pre-tax retirement contributions. For example: If a taxpayer finds themselves in the 39.6% bracket and they contribute to their 401(k), they will receive a credit of only 26% and have to pay 13.6% on the contribution. If they are in the same tax bracket when they later distribute the money, they will have to pay an additional 39.6% tax. In total they will have paid 53.2% of tax on their retirement savings if the plan is passed as outlined.