Unrealized Capital Gains Tax: What You Need to Know

The unrealized capital gains tax has become a hot topic in recent weeks, with Vice President Kamala Harris and President Biden proposing a tax on unrealized gains for the wealthiest Americans. But what does this mean, and how would it affect you?

What are Unrealized Capital Gains?

Unrealized capital gains refer to the profits from investments that have not been sold yet. For example, if you own a house or stocks that have increased in value, you have unrealized capital gains. These gains are also known as "paper profits" because they are not realized until you sell the asset.

The Proposed Tax

The proposed tax on unrealized capital gains would apply to households with net wealth over $100 million. Under this plan, they would pay a minimum effective tax rate of 20% on their unrealized capital gains each year. This means that if you have investments worth over $100 million, you would be taxed on the appreciation of those investments, even if you haven't sold them.

Who Would Be Affected?

Only a small number of people would be affected by this tax, estimated to be around 9,850 individuals in the entire country. These individuals would have to pay at least 25% on a combination of their income and their unrealized capital gains.

Pros and Cons

Proponents of the tax argue that it would help reduce income inequality and generate revenue for the government. On the other hand, critics argue that it would be administratively complex, reduce U.S. saving and entrepreneurship, and raise the tax burden on domestic savers.

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