Capital tax raise and the impact on investments

Source: Bloomberg. Since August 2020, Joe Biden had plans to fund some of his plans by raising taxes on wealthy individuals and corporations

Capital tax raise and the impact on investments.

Here’s what we know so far about the capital tax raise from a proposal from President Joe Biden.

2. Who is impacted? — It will apply to households making more than $1 million annually.

3. When will this come into effect? It is not specified now. Details are expected next week.

4. Is it final? — No, it is likely this is a high target, and the final tax will be around 30%, rather than 39.6%

Impact on stock market

The swift recovery was probably due to the fact people realized it was an overreaction. The final tax will not be as high as proposed 39.6%.

Impact on Cryptocurrency

Timeline

2022: If the timeline for tax raise is to take effect in 2022, there could more pain in the stock market and cryptocurrencies ahead especially just before 2022. Investors that are impacted by the new tax would want to lock in the capital gains at a lower tax rate and sell in 2021.

2021. However, if the tax raise is taking effect this year 2021 as a retrospective tax plan, the selloff in stocks and cryptocurrencies may only be short term and probably just an overreaction. Since the higher tax is already applied, might as well leave the money in the investments anyway. Is there anywhere else to invest? Probably the real estate, where in some cases you can sell off a property to buy another property immediately to prevent paying taxes but there are conditions to meet. Simply put, idle cash will still be injected and money should still stay in stocks and cryptocurrencies.

--

--

Financial minimalist looking for the next investment opportunities

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
darren

Financial minimalist looking for the next investment opportunities