Capital Gains Increases: Current Outlook in 2022

Owners sell their businesses for a variety of different personal and professional reasons. Regardless of the reason, one constant always exists in every conversation we have with owners about selling their business. Owners want to know what price they would get if they sold their business.

Price only answers a part of the question that owners are really looking to address. Owners also need to understand the structure of the transaction and the tax implications of the proposed deal. The Biden administration proposed raising the top capital gains tax from 20% to 39.6% before a joint session of Congress on April 28, 2021. This increase would affect long-term and short-term capital gains, since both would be taxed as ordinary income in the highest bracket.

I checked in with my tax advisors and they shared some good news with me that I want to share with owners who are contemplating a sale in 2022. The following tax increases are NOT in the current Bill:     

  • Increasing the top marginal rate from 37% to 39.6%;
  • Increasing the top capital gains tax rate from 20% to 25%; and
  • Reducing the estate tax exemption limit from $11.7 million per person ($12.06 million in 2022).

We are confident that the current administration will seek to increase capital gains rates, but the current belief among tax accountants is that it will not happen before midterm elections in November and more likely not until 2023. 

Please let us know if you would like to schedule a confidential call to discuss your interests by contacting us here.

Leave a Reply