Your guide to newly enacted – and proposed – changes to the tax code

Between the economic recovery from the pandemic and the new federal government, there have been many recent changes to the tax code that may have an impact on your financial plans. This page lays out articles explaining the tax changes that have already been enacted as well as proposals from the Biden administration that have not yet become law. 

Significant Changes That Have Already Been Enacted:

US Capital Building
Charitable Contributions

For 2020 and 2021 only, you can now deduct up to 100% of your adjusted gross income in qualified cash contributions (Consolidated Appropriations Act)

Older couple speaking with Financial Advisor
Delays in RMDs from IRAs

You can now wait to take RMDs until age 72, up from 70½   (SECURE Act)

Couple looking at documents
529 plan changes

The plan assets can now be used for student debts and siblings (SECURE Act)

US Capital Building
Child and Dependent Care Credits

Child tax credits and dependent care credits have both been increased and made fully refundable for 2021 (American Rescue Plan Act)

Significant Proposed Changes From the Biden Administration include:

Income Tax

  • Rates: The current top income tax rate would rise to 39.6%, potentially applying to individuals earning more than $452,700.
  • Long-Term Capital Gains Tax: The top capital gains rate would rise to be equal to the top ordinary income tax rate for individuals once Adjusted Gross Income exceeds $1 million.

Wealth Transfer Changes

  • Estate Tax: The estate tax exemption limit would be reduced to $3.5 million per individual, with the tax rate increasing from a flat 40% rate to a progressive tax structure that starts at 40% and tops out at 65%.
  • Step Up in Basis: Inherited property is now assessed at its value when it is inherited, rather than taxed on how much its value has increased. Biden has proposed eliminating this “step up” in basis for any unrealized gains of more than $1 million.
  • Gift Limits: A cap of $1 million on lifetime gifting, above the annual exclusion gifts. Gifts in excess of the $1 million limit would be subject to gift taxes.

For help in sorting out how these changes may affect your financial situation, talk to your Baird Financial Advisor team.

Baird does not provide tax or legal advice. Please consult your legal or tax professional for specific information.

The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor, and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.

Find a Financial Advisor Locator Form

Find a Financial Advisor Near You

A Baird Financial Advisor can help get you from where you are now to where you want to be.