New Income Tax Law Changes – What You Need To Know

The new income tax law changes will affect your financial plans whether you are an unmarried, married individual, trust, or estate with taxable income. It is important to understand the new tax rate and how it will affect your long-term and short-term financial goals. Here is what you need to know about the new income tax law changes.

Increase in Income Tax Rates and Rate Bracket Adjustments

The proposed hike in the income tax rate is among the most contentious issues. This will push individual tax rates to 39.6 percent on ordinary income. The new rate applies to couples filing jointly with taxable income of more than $450,000, household heads with taxable income of more than $425,000, and unmarried persons earning more than $400,000.

Couples filing separate returns who earn over $225,000, trusts, and estates with taxable income of more than $12,500 will also be affected by the changes.

There Is a Capital Gain of 25 Percent

You should also be aware of the five percent increase of the maximum capital gain from 20 percent to 25 percent. The new rate took effect on September 13 2021, and affects all sales and Qualified Dividends. Therefore, gains derived from sales before September that are reported using the installment method will be taxed at the initial rate of 20 percent.

Conclusion

The new income tax law changes will affect a wide range of people and income brackets. Because of this, you should understand the financial implication of the changes in your earnings, both in the short term and in the future.

To help you plan for the future, at Madonia & Associates, we share information about forthcoming tax changes to help you make an informed decision. Contact us today for legal, business, and tax counsel.