How Upcoming Capital Gains Tax Changes Could Affect Your Business Sale

It's an election year, which means change is in the air. And while we remain committed to keeping our political views to ourselves, we believe clients deserve a measured, realistic, and apolitical perspective of the landscape—especially when it comes to capital gains taxes and how the upcoming election could change them. Here’s what we know.

What Are Capital Gains Taxes?

Essentially, when you sell an asset for more money than you paid for it, you’ve made a capital gain that the government wants a piece of. Enter capital gains, which apply to a range of assets, including stocks and bonds, real estate, collectibles, and, of course, the sale of your business.

Currently, long-term capital gains (assets held for over one year) are taxed at a rate that does not exceed 20%. This could change in 2025, however, and the outcome of the election could impact capital gains tax policies.

Biden’s Stance on Capital Gains Tax

Obviously, the outcome of the forthcoming election remains uncertain. It's also unclear whether Vice President Kamala Harris would adopt President Biden's budget proposal if elected. What we do know is that the Biden administration had plans to address capital gains taxes in 2025.

Their proposed changes included:

• A proposal to nearly double long-term capital gains tax rates from 20% to 39.6% for investors making $1 million per year.
• A proposal to tax large inheritances by limiting the “stepped up” benefit for gains exceeding $5 million per person and $10 million per married couple.
• A secondary budget plan proposing an even higher tax rate of 44.6% for those with high net investment and taxable income. It’s worth noting that even if this proposal were approved, it would only apply to those with high net investments.

Vice President Kamala Harris’s Position

If she wins the 2024 election, will Democratic nominee Kamala Harris adopt Biden’s capital gains tax proposals? We don’t know. What we do know is that she has spoken about them and shown support for Biden’s plans in the past.

Trump’s Stance on Capital Gains Tax

While former (and possibly future) President Trump has outlined several specific tax proposals, including making changes to import tariffs and cementing aspects of the 2017 Tax Cuts and Jobs Act, he still has not made an official statement on capital gains taxes.

We do know that if he takes office, Americans will likely see the corporate tax rate lowered from 21% to 20%, amongst other changes. But whether Trump will address capital gains taxes in the future remains an open question.

Your Business: Keep It or Sell It?

Based on what we know about the 2024 presidential candidates and their policies, we are advising clients not to make any hasty decisions about keeping or selling their businesses, and here’s why:

• The outcome of the 2024 election is uncertain. So is Vice President Kamala Harris’s stance on capital gains taxes. The same applies to former President Trump.  
• Even if the Biden administration’s policies did take effect under Harris, it is unlikely that they would take effect immediately. In other words, you will still have time to make an informed decision based on real policy changes.
• These hypothetical policies impact different income brackets in different ways. They may not even apply to you.
• The decision to sell your business is one that should be based on many factors—not just who sits in the Oval Office.

The Guidance You Need. The Personal Attention You Deserve.

Have questions about capital gains or unsure whether now is the time to sell or hang on to your business? Give our president, Michael Hubsmith a call. Whether you’re considering selling your business or exploring strategic acquisitions, Michael offers the guidance and support you need to ensure a smooth and profitable transition. Contact Michael today to begin the conversation!