How a Landlord Making $75,000 a Year Could End Up in the Millionaire Tax Bracket

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VERSAILLES, Ky.—Five brick apartment buildings in this horse-country town make up Paul Settle’s retirement nest egg. He purchased the complex 27 years ago and has spent almost every day since tidying the grounds, repairing garbage disposals and collecting rent checks.

Mr. Settle, 64 years old, pays himself about $75,000 a year. The idea was always to one day sell and retire off the proceeds.

But now his plans are on hold. The Biden administration’s tax proposal would increase the capital-gains taxes Mr. Settle would pay on the sale of the apartments, which he expects to fetch over $2 million. Mr. Settle’s tax adviser estimates the changes could halve his after-tax proceeds to about $400,000 after paying off the mortgage.

“I’m in limbo,” he said.

Democrats argue for taxing wealth like work and are seeking to equalize the top rates on capital income and labor. But the line between rich investors and middle-class earners isn’t always so clear. Some, like Mr. Settle, fall into both categories.

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