Top executives and the company leaders like the Waltons, Mark Zuckerberg, and Google’s co-founders have sold $63.5 billion worth of stakes in their companies through November, up 50% from 2020. The sales come amid soaring market valuations and ahead of possible changes in U.S. and some state tax laws.

One of the targets of the administration of Joe Biden is the net investment income tax (NIIT). One of the most discussed propositions is the increase in income tax rates, bringing individual tax rates to 39.6% for ordinary income. We need to account for that, because the majority of U.S. citizens do report their digital holdings, in the same manner, they report their regular real estate and stock market investments. There will be an additional 3.8% surtax on net investment income (NII) that U.S. residents might have to pay on top of the capital gains tax. NII includes, among other things, taxable interest, dividends, gains, passive rents, annuities and royalties.

The maximum capital gains tax would also increase, from 20% to 25%. The 3.8% Net Investment Income Tax under Internal Revenue Code Section 1411 would be changed to expand the definition of net investment income to include any income derived in the ordinary course of business for single filers with greater than $400,000 in taxable income ($500,000 for joint filers) effective January 1, 2022. Under current law, the 3.8% tax generally only applies to passive investment income (interest, dividends, gain on the sale of stock, etc.)