Is Biden's Proposed 44.6% Capital Gains Tax Rate Really the Highest Since 1922?

So I was just reading some financial news and came across something that honestly shocked me. Biden is apparently proposing a capital gains tax rate of 44.6%?! This seems absolutely insane to me. From what I understand, this would be the highest capital gains tax rate since the tax was created back in 1922. I'm not super wealthy or anything, but I do have some investments that I've been holding onto for a few years that have done pretty well. I was planning to sell some of them next year to help with a down payment on a house, but now I'm reconsidering everything. Can someone explain how this would actually work? Would this rate apply to everyone or just people with really high incomes? And what strategies might be available to minimize the impact if this passes? I'm getting really worried about how this could affect my financial plans.

0 coins

19 comments

James Martinez

•8M

This proposal is specifically targeting high-income earners, not the average investor. The 44.6% rate would only apply to people making over $1 million annually. If you're not in that income bracket, your capital gains would still be taxed at the current rates (0%, 15%, or 20% depending on your income). The 44.6% comes from combining the proposed 39.6% top federal rate for high earners with the existing 3.8% Net Investment Income Tax (NIIT) that applies to investment income for higher-income taxpayers. Also worth noting that this is still just a proposal - it hasn't been passed into law yet and would face significant hurdles in Congress. For context, historical capital gains rates have fluctuated quite a bit. In the 1970s, the max rate was around 35%, and in the 1920s, it briefly reached 73% before being reduced. So while 44.6% would be high in recent history, it's not unprecedented when looking at the full history of the tax.

0 coins

James Martinez

•8M

You're absolutely right about state taxes. Capital gains are generally taxed as regular income at the state level, so residents of high-tax states like California, New York, or New Jersey would face even higher effective rates. In California, for instance, the top state income tax rate is 13.3%, which could potentially push the combined federal-state capital gains tax rate to nearly 58% for those highest earners. For most investors though, especially those making under $1 million annually, the capital gains rates would remain at the current 0%, 15%, or 20% federal rates (plus any applicable state taxes and the 3.8% NIIT if your income exceeds $200,000 for single filers or $250,000 for married filing jointly).

0 coins

Alexander Zeus

•8M

I went through a similar panic when I first heard about this proposal! After doing some research, I found this amazing tool at https://taxr.ai that lets you simulate different tax scenarios including potential capital gains changes. I was worried about my stock options that I'm planning to exercise next year, so I uploaded my current tax documents and ran some scenarios. Turns out for my income level (around $95k), the proposed changes would barely affect me at all. The tool even showed me some strategies for timing my stock sales to minimize the impact. What I really liked is that it explained exactly which parts of the proposal would affect my specific situation and which wouldn't. Saved me a lot of worry and helped me make a more informed plan for my investments.

0 coins

Alexander Zeus

•8M

Yes, it handles hypothetical scenarios pretty well! You can actually set different parameters and test various proposed tax rates. It makes clear what's current law versus what's being simulated, so you don't get confused. For state-specific issues, it actually does handle state tax differences. You can input your current state and also model what would happen if you moved to a different state. In your Washington to California situation, it would show you the pretty significant difference in state tax treatment of capital gains. It even highlights specific strategies that might make sense before your move (like realizing certain gains while still a Washington resident).

0 coins

Gabriel Graham

•8M

Just wanted to follow up on my skepticism about taxr.ai from earlier. I decided to give it a try since I'm seriously concerned about this potential capital gains increase and my upcoming move to California. The tool was actually really helpful - way more detailed than I expected. I uploaded my last year's return and it immediately showed me how much more I'd pay in California versus Washington. Then I used the simulator to model selling my long-term investments under different scenarios - current law, Biden's proposal, and even some in-between possibilities. Turns out I could save about $8,700 by strategically selling certain investments before my move. The tool even pointed out some specific lots of stock that would be most advantageous to sell now versus later. Definitely worth checking out if you're trying to plan around these potential changes.

0 coins

Drake

•8M

Anyone else having major issues getting through to the IRS to ask questions about capital gains? I've been calling for WEEKS trying to get clarity on how this might affect my situation with inherited property, and I can never get through. Always "high call volume" and disconnects. I finally used https://claimyr.com after seeing it recommended on another thread. You can check out how it works here: https://youtu.be/_kiP6q8DX5c - basically they hold your place in line with the IRS and call you when they get an agent. I was super skeptical at first because it sounds too good to be true, but I got a call back in about 45 minutes and finally got to speak with someone at the IRS! The agent explained exactly how the potential changes would apply to inherited property with stepped-up basis (which was my main concern). Saved me countless hours of frustration and waiting on hold.

0 coins

Drake

•8M

It's not an official IRS partnership - they use a system that essentially waits on hold for you. They have automated systems that dial and wait in the queue, then when they get a human IRS agent, they connect that call to your phone. So you're not really "skipping" the line, they're just waiting in it for you. I had the exact same concerns about it being some kind of scam or ripoff. But there's no risk of identity theft since you're the one who ultimately speaks directly with the IRS agent. They never ask for your personal tax information - they just facilitate the connection. And honestly, after spending hours upon hours trying to get through myself with no success, it was completely worth it to finally get my questions answered about the potential capital gains changes.

0 coins

Sebastian Scott

•8M

I have to eat crow on this one. After calling the IRS myself for THREE MORE DAYS with no success (always disconnected after 2+ hours on hold), I broke down and tried Claimyr from that link above. Got a call back in about 90 minutes with an actual IRS agent on the line. They answered all my questions about how Biden's capital gains proposal would impact my specific situation with cryptocurrency investments I've been holding for 3+ years. Turns out I was really misunderstanding how the proposed rates would apply to my income level. Since I'm nowhere near the $1M threshold, I'd still be in the 15% long-term capital gains bracket even if the proposal passes. The agent also explained some strategies for tax loss harvesting that could offset some gains. Definitely worth it just for the peace of mind and ability to actually plan my finances properly instead of stressing about worst-case scenarios.

0 coins

Emily Sanjay

•8M

Planning ahead is always good, but I wouldn't make any drastic moves based on proposals that haven't even made it to committee yet. If you're really concerned, the best approach is probably to run multiple scenarios - what happens if rates stay the same, what happens if they go up moderately, and what happens in the worst case. Then identify strategies that work reasonably well across all scenarios. The biggest mistake would be making irreversible financial decisions based on tax proposals that might never materialize.

0 coins