Below is a select summary of certain items that we believe would impact our client base. This is not an all-encompassing summary, and there are other tax proposals that have been discussed. The below items are just items that have been discussed as changes in which Joe Biden would like to make. The current tax law has not been changed as of the date of this post.
|Current Law||Joe Biden|
|Individual tax rates||7 Tax Brackets. Top tax rate of 37%.||Would increase the top tax rate to 39.6%.|
|Long Term Capital Gains and Qualified Dividends||Top rate of 20% with a 1 year holding period. 3.8% tax on net investment income for taxpayers earning over $200K if filing single or $250K if filing joint.||Taxed at top ordinary income rates (39.6%) for taxpayers with income greater than $1 million.|
|Itemized Deductions||The standard deduction was raised in the TCJA, there is a $10,000 state and local tax cap, and the Pease limitation for itemized deductions was eliminated.||Restore the Pease limitation on itemized deductions for taxable income above $400,000. Cap itemized deductions at 28% and end state and local tax cap.|
|Credits||Taxpayer may claim a $2,000 credit with respect to each qualifying child and a $500 credit for nonqualifying children and other dependents.||Expand dependent care credit to $8,000. Families will get a tax credit for as much as half of their spending on childcare for children under age 13, up to a total of $8,000 for one child or $16,000 for two or more children.
Raise the child tax credit to $3,000 per child for children ages 6 to 17, and $3,600 for children under 6 for 2021. Make credit fully refundable.
Supports a $3,000 tax credit allowing family caregivers to defray some of what they spend to assist their loved ones.
|Employment/Social Security Taxes||12.4% social security tax applied on worker’s wages up to $137,700 for 2020.||Keep the Social Security wage cap of $137,700 (indexed for inflation, but then apply the 12.4% tax on all wages over $400,000.|
|Corporate Tax Rate||21%||28%|
|Qualified Business Income Deduction (199A)||Taxpayer’s who have qualified business income may be entitled to a 20% deduction on that income.||End special qualifying rules, including those for real estate investors. Phase out deduction for taxpayers with taxable income over $400,000.|
|Depreciation||100% immediate expensing for qualified property through 2022, then phased down each year through 2026.||Would likely reverse the 2017 TCJA provisions which would significantly lower the amount of equipment that is qualified to be immediately expensed.|
|Real Estate||Deferral of capital gain tax on like-kind exchange of real property.||End qualified business income deduction for real estate investors. Would take aim at like-kind exchanges and prevent investors from using real-estate losses to lower their income tax bills.
Create a new refundable, advanceable tax credit of up to $15,000 to assist buying first home.
Tax credits to renovate distressed properties in distressed communities.
Enact renters tax credit.
|Estate Taxes||Estate tax exemption per donor of $11.7 million for 2021.
Assets passed through at death get a basis step-up to fair market value for the recipient.
Top rate is 40%.
|Reduce estate tax exemption amount to $3.5 million.
Eliminate stepped-up basis rule that allows people to pass capital gains to heirs without tax after death.
Increase top rate to 45%.
**The above summaries are based upon various articles, speeches, interviews and social media posts in which Joe Biden has discussed in regards to his tax considerations.