Presidential Candidates Tax Plans

As election day approaches, you may be wondering how each of the two presidential candidates may change your future taxes. President Donald Trump has proposed minimal tax changes if he gets re-elected and the few details he has shared seem to be centered around making permanent, or extending, some aspects of the 2017 Tax Cuts and Jobs Act (TCJA). On the other hand, Democrat nominee Joe Biden is proposing more substantial changes regarding income taxes if he gets elected, many of which would reverse changes that occurred as a result of the TCJA.  A brief written summary follows, and you can also link to a high-level comparison summary (click here) on our website.

Individual Income Tax:

President Trump has not announced he would make significant changes to individual income taxes if he gets reelected as he made sweeping changes during his first term. However, the President has proposed he will make the reduction in individual income taxes that was included in the Tax Cuts and Jobs Act of 2017 permanent and has indicated a desire to take the current 22% tax bracket down to 15%.

Biden has proposed to keep the current income tax brackets the same except for households making more than $400,000, which he is proposing to increase to a 39.6% tax rate. Additionally, for income greater than $400,000 Biden plans to phase out the qualified business income deduction (Section 199A) and cap itemized deductions at a 28% tax benefit. Turning to capital gain issues, Biden proposes taxing capital gains and qualified dividends at the ordinary income tax rate of 39.6% for taxpayers who have income exceeding $1 million.  Currently, long-term capital gains max out at a top tax rate of 20% and can also be subject to the Net Investment Income Tax of 3.8%. Lastly, Biden has proposed increased child tax credits child dependent care credits, as well as restoring the first-time homebuyer tax credit.

Corporate Income Tax:

The TCJA slashed the corporate tax rate from a 35% top tax rate down to a flat tax of 21%.  Under Biden’s plan, the corporate tax rate would increase to 28%.  Biden also is proposing to double the tax rate on foreign earnings that fall into the Global Intangible Low Tax Income (GILTI) rules, which were part of the 2017 TCJA, from 10.5% to 21%. Again, President Trump has not provided any indication for additional corporate tax reform, although he’s hinted at making permanent cuts to the payroll tax but has yet to give any specific details. As for tax credits, Biden plans to expand renewable-energy-related tax credits including restoration of the Energy Investment Tax Credit and the Electric Vehicle Tax Credit as well as ending tax subsidies for fossil fuels. Both Trump and Biden have proposed creating some type of “Made in America” tax credit, but neither have outlined specific details.

Estate Tax:

Currently the max federal estate tax rate is 40% and the exclusion amount at $11.58 million per person. Biden proposes to restore the 2009 estate tax levels with the tax rate increasing back to 45% and the exclusion amount back down to $3.5 million. Additionally, Biden has indicated that he wants to eliminate the step-up in basis for capital gains assets on inherited assets. Trump has not proposed any changes to estate taxes if he is reelected.

If you have any specific questions on how either candidate’s tax proposal may impact your personal/business tax situation, please reach out to your Greenwalt CPAs professional.

Published: October 20, 2020