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Treasury Official Says Proposed $1M Capital Gains Threshold Would Be Same for Both Couples and Individuals

Chris Gaetano
Published Date:
Aug 26, 2021

A Treasury Department official confirmed that the $1 million threshold at which the proposed capital gains tax increase would kick in would be the same for both married and single filers, giving single people an advantage, as it will take longer for them to reach the threshold,  Accounting Today reported. 

Under the proposal by President Biden, the current top rate for capital gains, 20 percent, would be moved up to 39.6 percent. With the preservation of the current 3.8 percent tax on investment income that funds the Affordable Care Act, this would make the rate for wealthy investors as high as 43.4 percent. Should this increase go through, it would reverse a longstanding policy practice of setting taxes for investment income lower than those for wages and salaries. Depending on states, some of which have their own capital gains tax, this could push the overall rate to about 50 percent.

But the 43.4 percent rate would apply only to investors making a million dollars or more. While previous publications had confirmed that this $1 million threshold applies to married couples, Treasury had demurred when asked whether single people would have the same threshold or whether it would be lower, as it often is when differentiating between married and single filers. Recently, though, Treasury spokesperson Alexandra LaManna, in answer to a question, confirmed that the threshold will be the same for both groups. 

Functionally, this means that a single person has more room to make profits at the current 23.8 percent rate (20 percent plus the 3.8 percent Affordable Care Act surcharge); conversely, a pair of high-earning spouses filing jointly would reach that threshold a lot sooner. It is the capital gains-specific version of the marriage penalty, where filing jointly leads to more taxes, not less, due to the combined income. But even if a high-earning married couple files separately, they won't do any better, as their thresholds as individuals would be $500,000 apiece. However, if a high earner is married to a low earner, separate filings could still help a little, as each spouse would be treated as a separate entity then. 

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