10 Major Points of The Biden Tax Plan

If you are interested in learning more about the Biden Tax Plan, you are in the right place –

Regardless of your political disposition, 2021 is around the corner and it’s time (if you haven’t already) to consider the major ramifications of Biden’s Tax Plan.

In 2020, I released my book “Confessions of A Tax Planning Man” which is included in our resources section of our website pursuant the Tax Cuts and Jobs Act of 2017.

Now, considering that the Democrats would likely need to gain control of the Senate to change any tax laws, I would argue that my book is not outdated until proven otherwise. The odds are we will still be applying the 2017 TCJA in near future. Even so, it’s prudent to plan for the future – especially if you find yourself in the $400,000+ club. Continue reading for more information about that…

As mentioned above, if you are part of the $400,000+ club (that is you earn more than this), you don’t want to be blind sided by the latest proposals…

In the spirit of brevity – I’ve summary the 10 major points of the Biden tax proposals –

  1. Higher Tax Rates for Higher Earners
    1. Biden proposes a 39.6% tax rate for top earners. It’s not clear if this is where the $400,000 numbers comes into play or if being single, married, head of household, of married matters either.
    2. Biden proposes capital gains to be taxed for earners making over $1,000,000 to be taxed at ordinary rates which is 39.6% potentially.
    3. Biden proposes to limited itemized deductions to 28% for high earners. (again, this might be the $400K number we keep hearing, not confirmed).
    4. Biden proposes that the social security tax ceiling be adjusted for inflation. The figure is $142,800 for 2021. Thus, this would be adjusted for inflation going forward.
  2. Elimination of Basis Step-up for Inherited Assets 
    1. Biden proposes that step-up’s are eliminated. Under the current law if someone owns property and dies, the basis is “stepped-up” to the heirs. This means that heirs would then only pay tax of any appreciated of the assets post-death.
  3. Some Real Estates Tax Benefits Going Away
    1. Biden proposes eliminating the $25,000 exemption for passive losses. Under the current law there is a special law that allows passive investors to deduct up to $25,000 of passive losses under certain circumstances.
    2. Biden proposes to eliminate like-kind exchanges that allowed real estate investors to defer capital gains tax by investing in like-kind property and other provisions therein the law.
    3. Biden proposes to eliminate accelerated depreciation for certain asset classes.
    4. Biden proposes the Section 199A deduction for profitable real estate activities.
  4. Section 199A Deduction Phasing Out
    1. The phase out of 199A will be for everyone making over $400,000, which differed from the prior regime which did not phase out for non-specified trades or businesses, but was subject to limitations. 
  5. More Child and Dependent Care Credits
    1. Biden proposes to increase the credit to $3,000 – $3,600 depending on age of dependent.
  6. More Dependent Care Credits
    1. Biden proposes to increase the credit to $8,000 for one child or $16,000 for two or more children.
  7. More Credits For Health Insurance
    1. Biden proposes to limit health cost to 8.5% of total income
  8. Credit To Buy A Home
    1. Biden proposes a $15,000 for first-time buyers.
  9. More Tax Benefits From Retirement Plans
    1. Biden proposes to reward working families for putting money away
  10. Higher Taxes For Corporations
    1. Biden proposes to increase the corporate tax rate to 28%
    2. Biden proposes a 15% minimum tax on corporations with more than $100 million in annual income. There would basically be a minimum amount of taxes these companies would have to pay.

In summary –

These points are based on what has been proposed in regards to the Biden Tax Plan. Again, you never know what can happen next…

In any case, we urge you to sign up for our updates here.

Or to obtain our resources here.

So that you aren’t blindsided by any tax developments.

Hope to see you on the inside!

Joe Gallegos, CPA

ABOUT THE AUTHOR: Joe Gallegos has created tax strategies and operating systems for businesses that have saved taxes, increased cash flow, and profits. As the Managing Partner of Tax and Consulting for JAG + Argueta CPA Firm, Joe has taught hundreds of business owners his step-by-step strategies for creating their own success and obtaining more time and more profits. For more profit creating business tips, tactics and strategies, sign up up for our tips here.

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