Summary of Biden-Harris Income Tax Plan

As we near the close of the calendar year, a major topic of conversation is the Biden-Harris Income Tax Plan, and the impact of potential changes to the US tax code.  These changes, if passed by Congress, may have significant consequences to millions of small business and individual taxpayers.

At the time of this article, it’s still unclear what political party will control Congress but it’s important to be informed in formulating your plan. 

Key Provisions in Proposed Biden-Harris Income Tax Plan

• The top individual income tax rate for taxable income over $400,000 increases from 37% to 39.6%.
• Qualified Business Income (QBI) deduction phases out when taxable income exceeds $400,000.
• Taxes on long term capital gains and qualified dividends at the ordinary income tax rate of 39.6% for taxable income in excess of $1,000,000.
• Impose a cap on itemized deductions for taxpayers with income greater than $400,000 paying at tax rates greater than 28%.
• Expands the Earned Income Tax Credit and Child and Dependent Care Tax Credits
• Increases the Child Tax Credit from $2,000-$3,000 for children 17 or younger while providing a $600 extra credit for children under the age of 6. This credit would also be made fully refundable.
• Re-establishes the First Time Home Buyers Credit and provides for up to $15,000 on qualifying purchases.
• Increases the Corporate Tax rate from 21% – 28%.

Key Provisions in Proposed Biden-Harris Estate and Gift Tax Plan

• Reduce the estate and gift tax exemption from $11,580,000 to $3,500,000 and increases the tax rate from 40% to 45%.
• Eliminates the step-up in basis on inherited property.

WM Wisdom:  Taxpayers must stay informed to implement the best tax strategies.  It’s important to consider the political climate and the impact of one party controlling all branches of government as well as the impact of one party’s ability to limit tax legislation by controlling the Senate when attempting to forecast future tax strategies.   

There is not a one-size-fits all tax strategy for everyone.  Each taxpayer has a different set of facts and circumstances.  It’s extremely important to consider the impact of both income tax and estate tax changes now before the calendar flips to 2021. 

At Wouch Maloney, we are here to assist you with customizing and implementing year-end estate and income tax strategies based on your unique situation and political perspective.

Should you have questions about this or other topics, please know we are available to speak by phone at 215-675-8364.

DISCLAIMER: The WM Daily Update COVID-19, COVID-19 Business Resources and COVID-19 Client News Alerts and other related communications are intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.