Democrats seem to have spared wealthy Americans like billionaire tech mogul Peter Thiel from big tax bills on their vast Roth retirement savings in legislation unveiled this week.
That break is courtesy of new language in a $1.75 trillion social and climate measure around required withdrawals from Roth accounts. The change to an earlier version of the plan protects the withdrawals from tax.
House Democrats proposed legislation Wednesday that would force taxpayers with retirement accounts worth more than $10 million total to withdraw money each year. (A similar proposal in September was stripped from the legislative framework in October, but then added back.)
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The rule aims to curb use of 401(k) plans and individual retirement accounts as tax shelters for the rich. It would ensnare investors like Thiel, a PayPal co-founder, who have so-called mega IRAs.
Thiel, for example, had a $5 billion Roth IRA in 2019, according to a ProPublica report published in June, based on tax-return data. (The IRA was worth less than $2,000 two decades earlier.)
The House’s initial proposal would likely have forced Thiel to nearly empty the account next year, according to tax experts. Due to his age, Thiel, 53, would have owed income tax on any portion of the withdrawal attributable to investment growth — meaning he’d likely owe taxes on nearly $5 billion, tax experts said.