A new comprehensive tax reform proposal was introduced by House Ways and Means Committee Chairman Dave Camp on February 26th, 2014. Camp’s proposal would cut the tax rate for C corporations to 25% over a period of five years. It would also cut individual tax rates to two brackets (10% and 25%), but it would add a 10% surtax on high income taxpayers. Of interest to the ESOP community is the fact that Camp’s proposal would cut in half the maximum pre-tax annual contributions that could be made to certain defined contributions plans, including 401(k) plans but not including ESOPs. According to House Speaker John Boehner, however, it is not likely that the Camp proposal will be voted upon during 2014. Subsequently, on March 4, 2014, President Obama released his 2015 Budget proposal, which includes a proposal to cap Section 401(a) plan retirement accounts to $3 million per individual. Since ... Read More..
This may be the opportune time to take action to avoid the increase in capital gains tax rates that will most likely take effect next year. According to the Kiplinger Tax Letter, Congress will likely increase the tax rate on long term capital gains for high income individuals from 15% to 20% starting next year. In addition, starting in 2013 the Obama Health Care Bill imposes a 3.8% tax on investment income and on capital gains for those who earn more than $250,000. These two tax law changes will result in a capital gains tax rate for 2013 of 23.8%, which is a 59% increase. If you have an interest in locking in the capital gains tax at the current rate but do not wish to sell your entire company to a third party, there are two tax strategies that you can use either to avoid paying the capital gains ... Read More..