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Major Tax Changes in the American Families Plan
The proposed American Families Plan would include the following major tax changes:
- Raise the top marginal income tax rate from 37 percent to 39.6 percent, which would apply to income over $452,700 for single and head of household filers and $509,300 for joint filers.
- Tax long-term capital gains and qualified dividends as ordinary income for taxpayers with taxable income above $1 million, resulting in a top marginal rate of 43.4 percent when including the new top marginal rate of 39.6 percent and the 3.8 percent Net Investment Income Tax (NIIT).
- Tax unrealized gains at death for unrealized gains above $1 million ($2 million for joint filers, plus current law capital gains exclusion of $250,000/$500,000 for primary residences).
- Apply the 3.8 percent NIIT to active pass-through business income above $400,000. Limit 1031 Like-Kind Exchanges above $500,000 in deferred capital gains, end the preferred treatment of carried interest, and make permanent the 2017 tax law’s limitation on excess losses that applies to non-corporate income.
- Extend the enhanced Child Tax Credit (CTC) in the American Rescue Plan Act (ARPA) through 2025, which provides $3,600 for children under age 6 and $3,000 for children ages 6 to 17 and phases out at a 5 percent rate beginning at $112,500 for head of household filers and $150,000 for joint filers. The credit amounts would not fall below what would be allowed in each year under current law.
- Make permanent the American Rescue Plan Act changes that made the CTC fully refundable and expanded the Earned Income Tax Credit (EITC) and Child and Dependent Care Tax Credit (CDCTC).
- Make permanent the expanded health insurance Premium Tax Credits provided in American Rescue Plan Act.
Source: Tax Foundation
