Tax Reform: Reclassifying Investment Management Income (Carried Interest) as Ordinary Income.
This Act fundamentally changes how income earned by partners providing investment management services (known as carried interest) is taxed. Previously often treated as lower-taxed capital gains, this income will now generally be reclassified as ordinary income, subjecting it to higher income tax rates. Additionally, this income will be included in the calculation of self-employment taxes.
Key points
Income from investment management services (carried interest) will generally be taxed as ordinary income rather than long-term capital gains.
This income will now be subject to self-employment taxes (Social Security and Medicare).
The bill introduces a 40% penalty for underpayments resulting from attempts to avoid these new tax rules.
Status:
Expired
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