On November 7, 2020, major news networks declared former Vice President Joe Biden the winner of the 2020 Presidential Election. With Biden’s election, there is likely to be a shift in many policies, from foreign diplomacy to tax incentives. One area that may soon be altered is an increase in the capital gains tax rate. What is this potential increase? Will it impact your Houston estate plan? And should you take action now before any new policy is put in place? Below are some common questions that Texans are asking in light of Biden’s election, specifically regarding capital gains tax considerations.
What is a Capital Gains Tax, and What Has Biden Proposed?
A capital gains tax is a tax on the growth of investments that an individual or corporation must pay when selling those investments. This means that the tax does not apply until an investment or stock shares are sold; however, capital gains taxes will incur every year until the investment is sold. The capital gains tax rate only applies to “long term capital gains,” which are assets held for more than a year.