Biden's FY25 Budget Proposal to Nearly Double Capital Gains Tax

Key Points

• Biden's proposed budget would increase capital gains tax to 39.6%.
• The increase would apply to investors earning over $1 million annually.
• Long-term capital gains are currently taxed at lower rates than ordinary income.

Details

President Biden's proposed fiscal year 2025 budget includes a significant increase in the capital gains tax rate. The proposal would raise the top rate from 20% to 39.6%, nearly doubling the current rate. This increase would apply to individuals earning over $1 million annually.

Capital gains are the profits realized from the sale of an asset, such as stocks, bonds, or real estate. Currently, long-term capital gains (held for more than one year) are taxed at a lower rate than ordinary income. Short-term capital gains (held for less than one year) are taxed at ordinary income rates.

The Biden administration argues that the capital gains tax increase is necessary to reduce income inequality and raise revenue for government programs. The revenue generated would be used to fund various social initiatives, including education, healthcare, and clean energy projects.