For business owners thinking of selling in the next few years, it’s important to be aware that capital gains tax rates might eventually rise under President Joe Biden.
Under his tax plan, Biden is seeking to nearly double capital gains tax rates.
His proposal says that the rate would increase from 20% to 39.6% on investment profits over $1 million. The rate would essentially match the highest income tax bracket.
However, such a change isn’t likely to happen right away, especially with the ongoing COVID-19 pandemic.
If a change is made, be aware that tax changes can be retroactive to the beginning of the tax year.
The key takeaways are:
- If you’re thinking of selling your business soon, pay attention to legislation as it arises and moves through Congress. While it will be tough to predict, you might want to try to close sooner rather than later, before any potential change is finalized.
- Pay closer attention to the after-tax proceeds of a potential deal, rather than the sale price itself.
Speak to a business attorney in your area for advice on selling your business.