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Top Tax Rates Under President Biden's FY 2025 Budget

Proposed Increases in Capital Gains Tax Rates

President Biden's FY 2025 budget proposal includes a significant increase in the top capital gains tax rate to 44.6%. The proposed tax rate, coupled with state taxes, could reach an effective rate of over 50% in some high-tax states.

Current Capital Gains Tax Rates

Currently, the top capital gains tax rate is 20%. However, with the addition of the 3.8% Net Investment Income Tax (NIIT) designed to fund the Affordable Care Act and the additional Medicare tax, the effective capital gains tax rate for high-income earners can reach 23.8%.

Proposed Changes in the FY 2025 Budget

Biden's FY25 budget proposal would nearly double the capital gains tax rate to 39.6%. This proposed increase would apply to investors who make at least $1 million in capital gains from the sale of assets held for more than one year.

Reasons for the Proposed Increase

The proposed increase in capital gains tax rates is intended to raise revenue to fund government programs and reduce income inequality. The administration argues that the current capital gains tax rates are too low and that wealthy investors are not paying their fair share of taxes.

Potential Impact on Investors

The proposed increase in capital gains tax rates could have a significant impact on investors, particularly those who make substantial capital gains from the sale of assets. It is important for investors to be aware of the proposed changes and consider their potential financial impact.

Conclusion

President Biden's FY 2025 budget proposal includes a significant increase in the top capital gains tax rate. This proposed change could have a major impact on investors and is likely to be a topic of significant debate in the coming months.

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