A 98% increase in taxes would hit business owners hard
Imagine deciding to sell your business – your life’s work – and having the taxes you would have to pay on income related to the sale double what they are today.
Well, that is what will happen if the administration’s capital gains tax increase goes into effect. The capital gains tax on some transactions could be raised from 20% to 39.5% -- that’s a 98% increase!
This proposed capital gains increase could take an additional $150,000-$200,000 out of your pocket for every post-sale million dollars in value.
This is important information to have now, because there has never been a better time to sell a business. We are seeing dramatic increases in what businesses are being valued at; in how many buyers are in the market looking for an opportunity; and the numbers of businesses that are being valued at a premium price.
Business valuations that were negatively impacted by the pandemic are starting to return to ‘pre-COVID’ levels. The banks and the business valuation firms recognize negative COVID impacts beginning March 1, 2020, and for some industries running through the end of this month, June 30, 2021.
Business owners with companies that have had historical success and growth prior to COVID and are returning to normal numbers this year need to know that the last 16 months won’t affect their market value as significantly as they might assume.
This might be the right time to sell – to ensure that you get the most out of your life’s work.