As we are nearing the election in November, we are starting to receive more details on some of the policies that likely Democratic presidential nominee Joe Biden is proposing. His stances on taxes have begun to take center stage over the past couple of weeks. Here are some of the details that Joe Biden is proposing.
Individual Tax Rates:
For those making $400,000 or more the top tax rate will be increased from 37% to 39.6%.
12.4% Social Security payroll tax on wage income over $400,000 (currently capped at $137,700). Tax would be split between employer and employee.
President Trump is looking to lower taxes on the middle class by 10%. This could effect those in the 22% or 24% brackets.
Increase top long-term capital gain and qualified dividend tax rate to 43.4% (ordinary income tax rate plus healthcare surtax) for income above $1 million. Today the top capital gains tax rate is 20% with a 3.8% net investment income tax.
The net investment income tax remains the same.
Biden is looking to limit total itemized deductions so the reduction in tax liability per dollar of deduction does not exceed 28%, which means taxpayers in tax brackets higher than 28% will face limited itemized deductions.
President Trump is looking to keep the standard deduction amounts the same at $12,400 per individual and $28,800 for married filing jointly.
Biden is also looking to phase out the 20 percent pass-through deduction for income over $400,000.
Presidential candidate Joe Biden is looking to raise the corporate tax rate from 21% up to 28%. Keep in mind that most corporations pay double taxation due to being taxed at the corporate level and then again at their personal level.
Biden is also looking at establishing a 15% minimum corporate tax rate for companies reporting a net income over $100 million. Currently, no minimum tax is imposed on companies.
Biden is also looking to remove the stepped up basis provision for stock that is inherited by beneficiaries. This means that instead of removing the capital gains the owner of the stock would either have to pay the capital gains or that burden will then be passed the the beneficiaries.
The second shift would be to the exemption amounts on estates. Biden is proposing moving the exemption amount down to $3.5Million and bump the estate tax rate up to 55%. This would be an increase from the exemption amount of $11,580,000.
There are several other changes that Biden is proposing that he has provided less detail on. He has also suggested raising taxes on wealthy especially around investment income. He also mentioned the possibility of getting rid of the 1031 Exchange for capital gains in real estate.