Biden’s Capital Gains Tax Proposal and QSBS

As American taxpayers await the unveiling of the Biden Administration’s tax proposal, investors can’t help but uneasily imagine the effects it will have on their long term capital gains. 

It has been stated that the sharp raise in capital gains tax, from a top rate of 23.8% to 43.4% including surtax, will affect only those grossing over $1m in income in a taxable year, however it has yet to be determined if that income stems solely from ordinary income or pass-through income as well.

While the approval of the proposed tax plan, especially as is, is still far off, investors may be looking for ways to stabilize their long-term capital gains plans and could be looking to QSBS as an answer.

It was, after all, the Obama administration who raised the tax exemption back in 2012 with The American Taxpayer Relief Act, first to 75% for eligible QSB stock acquired after February 17, 2009, and then again to 100% on capital gains for QSBS acquired after September 27, 2010. So, it is only natural to assume that Biden’s plan will protect that tax exclusion.

While the long-term benefits of QSBS don’t kick in until stock is held 5 years as opposed to the 1 year in traditionally traded stock, the ability to exclude up to 100% of taxes up to $10mm or 10x your initial investment may be exactly what investors need to restructure their portfolio and offer that peace of mind come retirement time. 

President Biden addressed congress on his tax plan on April 28, 2021, check out our updated coverage on QSBS in Biden’s Tax Plan.

Looking for specific advice on QSBS? Contact us to learn more.

This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.

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QSBS Expert was founded by a group of entrepreneurs, investors, accountants and lawyers who came together when trying to navigate a QSBS situation of their own. We quickly realized that the regulations left a lot of open questions and the publicly available information was confusing to sift through…so we thought that others may also benefit from having a “go to” resource for all things QSBS.