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 each candidate has discussed.

Current Law

Donald Trump

Joe Biden

Individual tax rates

 7 Tax Brackets. Top tax rate of 37%. Would make the current rates permanent. 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. Has discussed possible reduction of current top-level capital gain tax rates to 15%. Would consider indexing capital gains for inflation. 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. Permanently extend current law. 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.

Self-Employment Tax

 12.4% social security tax applied on worker’s wages up to $137,700 for 2020. No proposed change. 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% No proposed change 28%

Qualified Business Income Deduction (199A)

 Taxpayer’s who have qualified business income may be entitled to a 20% deduction on that income. No proposed change. 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. Commented on extending or expanding bonus depreciation. Would reverse the 2017 TCJA provisions which would significantly lower the amount of equipment that is qualified to be immediately expensed.

Like Kind Exchange

 Deferral of capital gain tax on like-kind exchange of real property. No Proposed change Repeal like kind exchanges for taxpayers with income over $400,000.

 

Gift/Estate/GST Tax Exemption

 Exemption per donor of $10 million indexed for inflation. $11.58 million per donor in 2020. Make the higher exemption amount permanent. Has called for returning the estate tax to 2009 levels. This would mean $3.5 million per taxpayer for estate and GST exemption, and $1 million for gift and GST exemptions per taxpayer.

Estate/Gift/GST Tax Rate

 Top rate of 40%. No proposed change. Possible top rate of 45%.

Basis Step-Up

 Inherited assets receive basis equal to the fair market value at date of death. No proposed change. Eliminate the step-up in basis and possibly tax unrealized capital gains at death on assets not passed on to surviving spouse or charity.