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Personal & Business Tax Changes To Expect If Joe Biden Takes Office

Personal and Business Tax Changes To Expect If Joe Biden Takes Office

With November 3rd on the horizon, the deadline to cast your vote in the presidential election is nearly here. Democratic presidential nominee, Joe Biden, has shared his tax policy proposals that will impact both business owners and individuals. As a way to raise federal revenue by $3.2 billion, Biden focuses on getting more taxes from both the wealthy and big corporations.

AA Tax & Accounting is here to inform you of some of the biggest proposed tax changes, not to sway you on your presidential vote. Let’s take a deeper look at how Biden’s plans will impact individual taxes and business taxes so you can have a well-rounded picture when casting your ballot on election day.

Individual Tax Changes

Although everyone will likely see some tax changes in 2021 based on Biden’s proposed tax plan, the most impacted will be wealthier Americans.

Taxes Remain Steady for Incomes Below $400,000
Under Biden’s proposed tax plan, households with an annual income under $400,000 shouldn’t see the amount they pay in taxes change. While middle-income families’ taxes will typically remain steady, there are a few instances where they could end up paying more.

One way individuals could end up paying more is through Biden’s proposed reinstatement of Obamacare’s mandate penalty for not having insurance. If health insurance isn’t purchased, the penalty would be an additional tax. Another way households might find themselves paying more in taxes is because of corporate tax increases. This will directly impact those owning stocks.

Adjustments for the Top 1% of Taxpayers
While middle-income families are mostly in the clear for tax increases, high-income households will likely take the burden of the proposed tax plan. In fact, Americans in the top 1% of households would see an after-tax income decrease of 16%—averaging a tax increase of $265,640.

Cap Deductions for Wealthy Taxpayers
For taxpayers that earn less than $400,000, they’ll be able to take the full value of itemized deductions. Households earning more than the $400,000 threshold will have the value of itemized deductions capped at 28%.

Capital Gains Taxed as Income
This proposed tax change has the largest impact on investors — especially those who have large investments in the stock and bond markets. When investors currently sell a share, they’re taxed differently than income. Under Biden’s plan, these gains would be treated like standard income.

As a result, any capital gains earned annually would be added as a form of income similar to salary and bonuses. This means that if individuals currently earn a lot of money through capital gains, they could find themselves with a big increase in their taxes.

Business Tax Changes

Businesses tend to take the brunt of the impact of Biden’s proposed business tax changes.

Increase the Corporate Tax Rate to 28%
The current tax rate for corporations is 21%. Under Biden, he is proposing the tax rate is increased to 28%—a pretty big jump in size. While there is a chance that tax increases get passed down to consumers through raised prices and labor, the increase in corporate tax rates shouldn’t impact the consumer much.

Set a Corporate Tax Minimum
In the past, large corporations like Amazon have been able to find ways to not pay taxes through various loopholes. However, Biden’s proposed tax plan ensures that all companies, no matter the scenario, will pay a minimum of 15% on all reported profits.

Tax Foreign Profits at 21%
One of the most drastic changes to tax rates impacts corporations and is related to foreign profits. Any money that is earned by foreign arms will have its tax doubled from 10.5% to 21%.

Tax Consulting Services in Cedar City, Utah

With proposed tax changes right around the corner, it can be overwhelming wondering what to expect. As you run into scenarios that may affect your taxes, you might decide that you’d like a tax consultant on your side to walk you through everything you need to know.

The AA Tax & Accounting Services team is committed to maximizing our clients’ tax savings and helping you feel confident come tax season. Contact us to schedule an appointment.

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