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President Biden’s 2022 Budget and Congress Increasing Taxes Retroactively

Recently, President Biden unveiled his 2022 budget request. As was widely anticipated, President Biden’s budget calls for some significant changes to the capital gains rules, including a proposal to increase the top capital gains rate from 20% to 39.6% plus an additional 3.8% net investment income tax, making it a maximum capital gains tax of 43.4% for income in excess of $1 million. The President’s budget calls for the increase in the top capital gains rate to be implemented retroactively. This means it would apply to some point in 2021.

Not only would this be one of the highest capital gains rates in history, this would be one of the handful of times tax law has been changed retroactively which could be devastating tax wise considering the dynamic we are in currently. We have exorbitant appreciation in housing prices and businesses selling for gains.

Here’s one of the biggest questions; can Congress make changes to the Tax Code today that affects the taxes of yesterday? In one word, “yes.” The president and congress did it in March 2021 and had retroactive treatment back to January 2020. When it comes to tax policy, Congress has the ability to enact policy as it sees fit, within constitutional limitations. Accordingly, there is nothing stopping Congress from passing the Biden tax plan and making the proposed 39.6% top capital gains rate retroactive to some point earlier this year.

Here’s the next question; will Congress increase the top Capital Gains tax retroactively? We don’t know. If history repeats itself, the answer is probably yes. It happened under the Clinton and Obama administrations. However, it is looking like the earliest the Biden tax plan will be passed is Q3 2021. By then, what is legally permissible, retroactively changing the capital gains rules, becomes far less politically feasible, as retroactive tax hikes tend to be viewed in an especially harsh light. Dramatically changing tax policy, to increase taxes, more than halfway through the year when many individuals have already acted would likely be unpopular especially with mid-term elections being a year away. Plus, a change to the capital gains rules with a midyear effective date (e.g., a 20% top capital gains rate for pre-April, May or July 2021 sales, and a 39.6% top capital gains rate for sales made after April, May or July 2021 or later) would be a logistical nightmare for taxpayers, CPAs, tax preparers, and even the IRS. As a profession, we hope for an effective date of January 1, 2022. Time will tell what happens.

Our motto is plan for the worst and hope for the best. So tax planning is crucial. With just a few months left in which taxpayers can take action to mitigate the potential of a dramatically higher capital gains rate. Business owners, for instance, may wish to accelerate the sale of their companies in order to capture gains at the current top rate. The same goes for owners of highly appreciated real estate and other taxable investments. Conversely, those individuals with already-anticipated 2021 sales for which payments will be made over multiple years may want to plan to opt out of the installment method of accounting to ensure gains are reported in 2021. Ultimately, the list of potential planning strategies is long, but the time in which individuals have to implement them is not. Simply put, if you’re the owner of highly appreciated assets, the best time to begin planning for the potential changes to the capital gains rate was yesterday. The next best time is today.

Please call or email us for more information and questions.

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Jocelyn Sihathep (Jo1)

Office Manager

We have a Sun Devil in the house! We are honored to add to our team, Jo. She is a graduate of Arizona State University (Fear the Fork) and is looking to broaden her knowledge and understanding of business and accounting.

She is the engine of our fine-tuned machine. Her “can do” attitude, commitment to customer service and outstanding organization skills allows us to focus on what matters most, our clients. She is amazing with technology and strives for excellence. She embraces the entrepreneurial spirit and is a great asset to our team.

Jocelyn Weatherley (Jo2)


Jo was previously an accountant for a $60M company and their 13 subsidiaries. She is in charge of our accounting and bookkeeping department and serves our clients on their time schedule. Whether it is weekly, monthly or quarterly she helps provide reliable, useful and accurate information to our clients on their terms.

Jo performs full accrual accounting and is responsible for reconciling all accounts, journal entries, month end closing procedures and preparation of internal financial statements and analytics. She also assists in the preparation of sales and payroll tax returns. She holds a wide range of knowledge, from QuickBooks to travel (she spent most of her life in the UK), she’s your girl. She is excited to join the CCA team and ready to conquer tax season head on!

Dixie Cary

CPA and Tax Manager

Dixie is a Minnesota CPA and experienced accountant. She has over 25 years of accounting in both audit and tax, but her passion is tax. After years in the cold, she decided to leave the mid west and find a new home in Sunny Arizona. We are so happy that Dixie has joined our team.

Dixie leads and manages our entire tax department. She assists and leads a team through our busiest times while delivering quality, complete and accurate tax services for our clients. She is proficient in preparation, planning, and education of federal and state income taxes for individuals, businesses, estates, trusts, and exempt organizations.

Theresa Elaine Valade

CPA and Managing Partner
Theresa has over 27 years of experience in tax, audit and consulting. She was with the International CPA Firm of Arthur Anderson in Phoenix and San Francisco. She most recently was a partner with Moffitt & Company, P.C. Her areas of specialization are business consulting and advisory, audits, income tax planning and preparation, and IRS audit representation. Her industries of specialization are nonprofits, real estate, hospitality, franchises, mortgage banking and brokering, title insurance, escrow, health, and beauty.
One of Theresa’s biggest honors is being named the 2020 CPA firm of the year for her commitment and service to her clients during the challenges imposed by the COVID-19 pandemic. Putting passion and personalization at the forefront Theresa has led her firm to excellence by not only providing measurable results for clients but making them feel well taken care of during times of great uncertainty.
Theresa is also a member of the prestigious, Arizona Society of CPAs, ASCPA, 100% Membership Club. It is an honor to be part of this club that exhibit’s a high level of commitment to the Arizona Society of CPAs. We are privileged to be able to convey to our clients, staff, and colleagues of Theresa’s significant commitment to the CPA profession.