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The American Families Plan, Carried Interest, and Potential Financial Impacts


By Adam O'Feeney, Tax Manager, CironeFriedberg, LLP

President Joe Biden has already announced the American Rescue Plan in early March 2021 followed by the American Jobs Plan (AJP) later that month.  The third leg of Biden’s road to recovery is the American Families Plan (AFP), announced on April 28, 2021, at an estimated cost of $1.8 trillion.             

Part of the Build Back Better initiative, the AFP aims to boost the U.S. economy by investing heavily in infrastructure, jobs, education, healthcare and other programs for millions of Americans and would be funded through a number of tax hikes including the elimination of long-standing tax breaks such as the carried interest preferential tax treatment.

The White House breaks down the $1.8 trillion AFP into three main parts:

  • Add at least four years of free public education through quality universal pre-kindergarten and free community college; close equity gaps by training teachers and making college more affordable for low- and middle-income students.

  • Provide direct support to children and low- and middle-income families by increasing access to quality child care; create a national paid family and medical leave program; and provide nutritional assistance and health programs aimed at reducing childhood hunger.

  • Extend tax cuts for low- and middle-income families with children and American workers through the child tax credit, the earned income credit, and the child and dependent care tax credit.

President Biden describes his Build Back Better plans as “fiscally responsible”, because they rely on tax revenue to pay for spending programs and credits.  While the AJP plans to be funded by corporate tax increases, the AFP will be paid for by higher individual taxes on the wealthy. 

The White House breaks down the major individual tax impacts as follows:

  • An increase to the top individual federal income tax bracket from 37% to 39.6% for income $509,300 (married joint) and $452,700 (single).
  • To the extent their income exceeds $1 million, taxpayers would see their capital gains taxed at a rate of 39.6% (nearly double the current capital gains tax rate of 20%).
  • Consistent application of the 3.8% Medicare tax on earnings over $400,000.
  • An investment in IRS enforcement through increased funding for IRS audits.  A White House representative estimates that the top 1% of individual taxpayers failed to report 20% of their income, resulting in $175 billion owed in taxes.

Under current law, private equity money managers and others can lower their tax bills by paying as low as 20% on carried interest profits.  President Biden and his administration are pushing to eliminate this preferential treatment, and are proposing the income be subject to the same rates as their other income (up to 39.6% as outlined above).

Whatever your current family and/or financial situation may be, it is important to understand how these changes can impact you.  With such a large amount of sweeping changes being proposed in a relatively short amount of time, it goes without saying that the money has to come from somewhere. 

If you need assistance or have any questions related to the American Families Plan, or any other potential tax law changes, please call your CironeFriedberg professional. You can reach us by phone at 203-798-2721 (Bethel), 203-366-5876 (Shelton), or 203-359-1100 (Stamford), or email us at

We are focused on your success. If you need assistance or have any questions about the information shared in this newsletter, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at

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CironeFriedberg, LLP
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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