Progress Made On Bill That WIll Close Tax Loopholes For Fund Managers

A bill that will increase the taxes paid by managers of hedge funds, private-equity funds, and other investment funds is expected to be released today as part of the multi-billion dollar jobs package. Since the downturn in the economy, hedge fund managers have been receiving a lot of attention over their pay and the rate at which it is taxed. Presently, hedge fund managers earning millions of dollars a year are taxed at a 15% tax rate for a majority of their income because most of their income comes from their share of investment profits which is taxed at the capital gains rate of 15% rather than the ordinary income rate of 35% for the highest earners. However, fund managers should start preparing for an increased tax rate if the jobs bill is passed. The bill proposes to treat 75% of investment profits received by fund managers as ordinary income rather than capital gains.

For more details on the jobs bill and the implications for fund managers, see this Reuters' article.

For the summary of the jobs bill, see the Senate Committee on Finance page.

Posted by Wesley J. Bailey, Associate Editor, Wealth Strategies Journal.