A Look at Joe Biden’s Tax Plan

As of this writing, Joe Biden has yet to have been officially declared president elect, however, there is little doubt that he will be sworn in as president later this month. That being said, Joe Biden’s ability to get his tax proposals through Congress will hinge on whether the Republicans lose their majority in the Senate. We shall know this soon enough.
Biden’s Tax Change Goals
Those with taxable income over $400,000 would face a significant increase in taxes (back to 39.6%) while most of us would experience no change or pay slightly less. All tax brackets except the highest classification would remain the same. Moreover, Biden would like to raise corporate taxes from 21% to 28%.
Other proposed changes include the following:
• Capping itemized deductions at 28%.
• A 26% refundable tax credit for each dollar contributed to an IRA or 401(k). Tax credits would be deposited into taxpayers’ retirement accounts.
• New homebuyers receiving a $15,000 tax credit.
• Taxing of capital gains at 39.6% for those who earn over $1 million… a 19.6% hike.
• Securing the solvency of Social Security funds by lifting the cap on Social Security payroll taxes on annual wages over $400,000.
• Phasing out the qualified business income deduction for those with taxable income over $400,000.
• Reinstating the Pease limitation, which places a cap on how much certain taxpayers can claim in itemized deductions.
• Raising the estate tax to 45% and dropping the exemption to $3.5 million.
• Increasing child tax credits to a maximum of $3,600.
• Increasing child and dependent care credit to $8,000.
• A $5,000 credit for caregivers of elderly relatives.
• A renter’s credit that would reduce rent and utilities to 30% of income.
We suggest you meet with your tax professional to assist you with tax planning for 2021, as well as for forthcoming years. For those of you who are our clients, we offer unlimited tax planning advice throughout the year.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information call 661-259-1967 or visit www.protaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.