Joe Biden Tax Plan Topics:
☐ increase capital gains tax
☐ elimination of step-up basis
☐ elimination of the 1031 exchange
As the 2020 presidential election comes to an end, many are wondering what Joe Bidens' Tax Plan could do to the asset markets; By looking into his tax plan, we may have a couple of hints.
As many know, democratic nominee, Joe Biden plans to raise taxes on corporations along with taxes on individuals who make more than 400k per year. This will be done by raising income, payroll, and most importantly, capital gains taxes.
Any time someone sells an asset like stocks, bitcoin, or real estate for more than what they purchased it for, it creates a taxable event. Taxable events like these are what make up the capital gains tax.
As an example, let's say you purchased 1 Bitcoin for 4k earlier this year. With the rapid increase in Bitcoin's price, you decided to take profit at 14k, leaving $10,000 of taxable income. The percentage of that which is owed to the government is dependent on the capital gains tax rate. Biden plans to raise this capital gains from 20% to 40% for those making more than $1 million per year. Though most of us do not make more than $1 million per year, a 20% tax increase will lessen the incentive for big players to be in the market. Thus having a negative effect on asset prices all around.
Another factor to consider is that Biden plans to eliminate step-up basis. Currently, when an asset is left to an heir, the basis of that property is increased to its current fair market value. If that heir then chooses to liquidate the asset, it is only taxed on the difference in price since they gained possession. By eliminating the step-up basis, when the heir goes to sell, they will be taxed from their grantees' purchase price. This could potentially reduce the number of people holding assets long-term.
Lastly, Biden wishes to eliminate the 1031 'like kind' exchange. For those of you familiar with real estate, many people have used the 1031 exchange to move liquidated funds from one investment property to another tax-free within a timed threshold. By eliminating this, there will be much incentive for property investors to keep re-investing their money. Likely having a negative effect on housing prices.
By reducing incentives to keep investors money in the market, it seems that the Joe Biden Tax plan could have a negative effect on markets all around.
Looking at Bitcoin technicals, it seems it is ready for some bearish fundamentals. The BTC price is grinding against the top of the year-long channel which I do not expect to break without a fight. Looking forward to seeing what effect the presidential election has on immediate pricing.
☐ increase capital gains tax
☐ elimination of step-up basis
☐ elimination of the 1031 exchange
As the 2020 presidential election comes to an end, many are wondering what Joe Bidens' Tax Plan could do to the asset markets; By looking into his tax plan, we may have a couple of hints.
As many know, democratic nominee, Joe Biden plans to raise taxes on corporations along with taxes on individuals who make more than 400k per year. This will be done by raising income, payroll, and most importantly, capital gains taxes.
Any time someone sells an asset like stocks, bitcoin, or real estate for more than what they purchased it for, it creates a taxable event. Taxable events like these are what make up the capital gains tax.
As an example, let's say you purchased 1 Bitcoin for 4k earlier this year. With the rapid increase in Bitcoin's price, you decided to take profit at 14k, leaving $10,000 of taxable income. The percentage of that which is owed to the government is dependent on the capital gains tax rate. Biden plans to raise this capital gains from 20% to 40% for those making more than $1 million per year. Though most of us do not make more than $1 million per year, a 20% tax increase will lessen the incentive for big players to be in the market. Thus having a negative effect on asset prices all around.
Another factor to consider is that Biden plans to eliminate step-up basis. Currently, when an asset is left to an heir, the basis of that property is increased to its current fair market value. If that heir then chooses to liquidate the asset, it is only taxed on the difference in price since they gained possession. By eliminating the step-up basis, when the heir goes to sell, they will be taxed from their grantees' purchase price. This could potentially reduce the number of people holding assets long-term.
Lastly, Biden wishes to eliminate the 1031 'like kind' exchange. For those of you familiar with real estate, many people have used the 1031 exchange to move liquidated funds from one investment property to another tax-free within a timed threshold. By eliminating this, there will be much incentive for property investors to keep re-investing their money. Likely having a negative effect on housing prices.
By reducing incentives to keep investors money in the market, it seems that the Joe Biden Tax plan could have a negative effect on markets all around.
Looking at Bitcoin technicals, it seems it is ready for some bearish fundamentals. The BTC price is grinding against the top of the year-long channel which I do not expect to break without a fight. Looking forward to seeing what effect the presidential election has on immediate pricing.
Comment:
Over a 5% drop on the announcement of a Biden Presidential win. Though my outlook on a majority of asset classes is now negative; there is a rumor that Biden could be pro-crypto. Certainly worth keeping an eye on. Cheers everyone.
Creator of DepthHouse Indicators on TradingView!
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