The House Ways and Means Committee is expected to consider legislation Labor Day week that would change the income tax rate on capital gains as part of the pending infrastructure bill. While the language of this bill is not yet available, there is reporting that the bill will include an increase in the long term capital gains tax rate from 20% to 39.6%. The proposed tax bill is anticipated to be effective as of the date it is introduced into Congress.

In light of this potential change in the law and related effective date, it might be prudent for taxpayers who were planning to sell investments to free up cash or for rebalancing their portfolio, to complete these transactions in the next several days. There is indication that if a taxpayer meets a binding commitment test to sell an asset before the effective date of this bill they would be allowed to use the current long term capital gains tax rate of 20%. If action is not taken quickly, this bill could mean the tax rate could be as high as 39.6% on any future transactions.

If you are in a planning process with your advisors or have unrealized gains that you intended to capture before the expected tax increases in 2022, please reach out to your Somerset Advisor or contact us at 317.472.2200 or to discuss how this potential change in the effective date could impact your planning.