Biden Tax Plan Highlights

Though the electoral college has not made it official yet, and there is a lot of evidence of voting irregularities, as this goes out, it still looks like Biden as the next POTUS. With the Senate still in flux but leaning Republican, there is plenty of doubt as to how much of a Biden tax plan he can get through. Here are the highlights as presented in his tax plan so you can see how changes may influence your personal and business financesi:

General Tax Provisions

These are general in nature, not targeted at business, handled next.

  • Reversion of the top individual income tax rate for taxable incomes over $400,000 from the current 37% to the pre-Tax Cut and Jobs Act rate of 39.6%

  • The tax benefit of itemized deductions will be capped at 28% of value for those earning over $400,000. This means that taxpayers earning over the limit will have their itemized deductions limited if their tax rate is over 28%.

  • Expands the EITC, Earned Income Tax Credit, for childless workers over 65 years of age.

  • Imposes a 12.4% Social Security payroll tax on income above $400,000 to be evenly split between employers and employees.

  • Incomes above $1 million will have long-term capital gains and qualified dividends taxed at the ordinary tax rate of 39.6%.

  • From 2021 forward for as long as economically necessary, the CTC, Child Tax Credit, maximum will be increased from $2,000 to $3,000 for children 17 and younger. It also provides a $600 bonus credit for children under the age of 6.

  • Reestablishes the First-Time Homebuyers’ Tax Credit of up to $15,000 for first-time homebuyers.

  • Phases out the QBI, Qualified Business Income, deduction (Section 199A) for filers with taxable income above $400,000.

  • Restores estate and gift taxes to 2009 levels.

  • Expands the Child and Dependent Care Tax Credit (CDCTC) from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents) and increases the maximum reimbursement rate from 35 percent to 50 percent.

Proposed Business Tax Changes

These are focused on businesses both large and small.

  • Establishes a Manufacturing Communities Tax Credit to help businesses that experience workforce layoffs or major government institution closures.

  • Increases the corporate tax rate from 21% to 28%.

  • Tax credits for small businesses that adopt workplace retirement savings plans.

  • Doubles the tax rate on (GILTI) Global Intangible Low Tax Income from 10.5% to 21% for income owned by company foreign subsidiaries.

  • Ending of tax credits for fossil fuels and expanding/establishing credits for:

    • Carbon capture

    • Use and storage of sustainable energy

    • Residential energy efficiency

    • Restoration of the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit

  • Corporations with book profits of $100 million or higher will have a structured minimum alternative tax. They will pay the greater of their regular corporate income tax or the 15% minimum tax. Net Operating Loss and foreign tax credits will continue.
  • Expands the New Markets Tax Credit and makes it permanent.

There you have it. Of course, these are not set in stone, and few if any may ever get through both houses and get signed.

i Details and Analysis of President-elect Joe Biden’s Tax Plan, from TaxFoundation.org

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