With the election finalized, we can now focus on what to expect under a Biden administration. One of his biggest campaign agendas was tax reform and now with a Democrat-controlled Senate, his tax plan may easily come to fruition. I'd like to list these as a summary from an article (which can be accessed in full below).
1) Higher Maximum Tax Bracket Rate: raise the top bracket back to 39.6% and impose an additional tax on incomes above $400,000.
2) Itemized Deductions: would remove the $10,000 "SALT" tax cap and limit the tax benefits of itemized deductions for upper-income individuals. This is good news for high-tax states like CA and NY.
3) Higher Maximum Rate on Long-Term Gains: could almost double the capital gains rates for high income earners.
4) Higher Social Security Taxes for Upper-Income Individuals: additional Social Security taxes could be assessed on incomes of $400,000 or more.
5) Elimination of Basis Step-Up for Inherited Assets: could result in huge increases in taxes when inherited property is sold.
6) Elimination of Real-Estate Tax Breaks: could eliminate the popular 1031 exchange provision and rules that allow for quicker depreciation and the QBI for rental real estate.
7) Increased Child- and Dependent-Care Credits: increases the child tax credit to $4,000.
8) New Credits for Homebuyers and Renters: create a new tax credit of $15,000 for eligible first-time homebuyers.
9) Green Energy Tax Changes: reinstate or expand tax incentives intended to reduce carbon emmissions.
10) Increased Business Taxes: Increase business tax rates to 28% and introduce a new tax on businesses making $100 million.
Download the full article here:
While some of these are welcomed and not so much to others, it is still early and usually the initial tax proposals are used as a starting place for negotiations in Congress. Additionally, a multitude of tax changes can result due to the ongoing impact of COVID-19.
We will certainly keep our eye on any developments.