Biden Proposes Increase in Capital Gains Tax Rate

Proposed Increase to 39.6%

In his Fiscal Year 2025 budget proposal, President Biden has called for a significant increase in the capital gains tax rate for certain investors. The proposed rate increase would apply to individuals with taxable incomes above a certain threshold and would nearly double the current rate.

Current Capital Gains Tax Rates

Currently, long-term capital gains are taxed at a lower rate than ordinary income, while short-term capital gains are taxed at the same rate as ordinary income. The preferential treatment for long-term capital gains encourages investment and helps to mitigate the impact of price volatility.

Proposed Changes

Under the Biden administration's proposal, the capital gains tax rate for high-income investors would increase from 20% to 39.6%. This would effectively double the tax rate for these individuals, potentially impacting their investment decisions and potentially reducing the incentive to hold investments for the long term.