The fate of carried interest tax exemption is once again a topic of discussion in the US, an issue that deeply concerns investment firms. The tax loophole allows profits earned by fund managers to be taxed at the capital gains rate, which is typically lower than ordinary personal income tax. This has been a controversial benefit widely used by venture capital, private equity, and other types of investment firms.
However, with Joe Biden recently sworn into office having promised new tax legislation, the continuity of the carried interest loophole appears highly unstable. The Biden administration’s proposed tax plan seeks to eliminate this loophole to increase tax revenues, raising worries amongst the investment community. The 2024 presidential election could prove pivotal in deciding the ultimate fate of this exemption that has been a vital advantage for investment firms in the US. The firms are now on the defensive once more, bracing for potential legal battles, and strategizing to cushion the impact of probable tax increases.
