New Tax Proposals: How They Could Affect Your Investments

Jun 12, 2023
Est. Read Time: 3 minutes

A Great Investment

For as long as people have been investing, the first steps have always been the same:

  1. Identify a good opportunity.
  2. Hire a CPA or attorney to help you postpone the impact of the tax bill on your income.

The tax proposals being sent to Congress with the endorsement of Treasury Secretary Yellen could become suffocating to your hope for investment earnings. The proposals will not eliminate investor profits. The proposals, however, will make the net profits so small that many investments may not be worth the risk. Let’s take a look at the current tax change proposals.

Let’s say you worked hard and had a good year from your active income. In addition, you made some good investment decisions and sold one of your investments for a handsome profit. Your income from work and investing topped $1 million. (This can happen to any successful investor.)

“No worries” you may say. “I will have the advantage of the lower long-term capital gains rate on my investment income. I will use a 1031 Exchange and keep delaying the tax bill. Sure, delaying taxes means the tax will come due in the future when taxes could be higher. However, that will be in the future, so I don’t care today.”

Proposed Tax Changes

  1. The Administration’s proposal to eliminate the ability to use long-term capital gains rates for any family that has a combined income exceeding $1,000,000 from all sources.
  2. The Administration’s proposal to eliminate the use of 1031 Exchanges.

Let’s do the math on your successful year:

Investing Using Your Funds Investing Using a Roth IRA*
Maximum Income Tax Rate on    All Earnings No Long-Term Capital Gains Rate 39.6% 0%
Net Investment Income Tax This tax is leftover from an earlier Administration.

It was enacted to help pay for the Affordable Care Act. Watch for this tax to increase in the future.





Social Security Tax The Administration’s proposal is to charge you extra Social Security tax.

Proposed rate is 12.4% on ALL earnings over $400,000.





State Income Tax For this, we need to use a plug number. Some states have no state income tax, while others have a graduated income tax that goes as high as 13.3%.

The number we use is an estimate. Adjust accordingly for your state.





Total Potential Income Tax 60.8% 0%

*Two goals must be met for a tax-free distribution from a Roth IRA:

  1. You reach the age of 59½.
  2. The Roth account must be five years old.

In the above example when you invest with your money:

How much of the risk did you assume?             .100%

How much of the profit do you keep?                 39.2%

However, when you make the same investment using the money in a Roth IRA:

How much of the risk did you assume?               100%

How much of the profit does your IRA keep?    .100%


IRA Club Suggestion

If you have a Roth IRA, use it for:

If you have a Traditional IRA:

If your IRA can’t afford the investment you want:

  • A Self Directed IRA can be a partner to participate in larger opportunities.

If you don’t have an IRA:


For information about the Self Directed IRA or Solo 401k, call IRA Club at 312-795-0988


IRA Club offers no investments, products, or planning services. Therefore, please consult your attorney, tax professional, financial planner, and any other qualified person before making any investments. Be advised that IRA Club does not evaluate, review, monitor, recommend, warrant, guarantee, or otherwise endorse the legality, tax treatment, propriety, performance, or reliability of any investment, service, statement, opinion, or other representation provided with respect to the investment opportunities listed on its site or their sponsors or providers. IRA Club has no financial arrangement, partnership, joint venture, or other affiliation with the sponsors or providers of these investments. IRA Club shall not be liable for any misinformation, misrepresentation, negligence, act, omission, investment results, or any wrongdoing with respect to any of these investments or their sponsors or providers.


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