The rise of a new presidential administration often leads to changes in the tax code, and the Biden administration will be no different. In addition to changes in tax brackets, there are many other ways in which taxes can change for both individuals and companies.
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For the most part, the Biden administration seems intent on focusing its tax increases on what most would consider the wealthiest Americans, those earning at least $400,000 per year. However, there are a number of tax increases that might be in store under President Joe Biden, even for those earning less. Here’s a quick look at 8 ways in which your taxes might go up during the Biden administration.
Changing Tax Brackets
One of the Biden administration’s main tax changes is to restore the top tax bracket to the level it was before the Tax Cuts and Jobs Act was enacted in 2018. Specifically, the current 37% tax bracket will rise to 39.6%. This change will only affect those earning $400,000 or more. All other tax brackets will remain the same. On a theoretical $500,000 income, this would raise the tax on the incremental $100,000 to $39,600 from $37,000.
Increasing Capital Gains Taxes
One of the main benefits of current tax law is the capital gains tax structure. This allows those holding capital assets for longer than one year to benefit from lower tax rates on gains triggered by any sales. For most taxpayers, the long-term capital gains rate is just 15%. Those with taxable income of $80,000 or less may pay as little as 0% in tax on long-term capital gains. For singles earning $441,450 or more, or joint filers earning at least $496,600, capital gains rates jump to 20%.
Under the new Biden proposals, those earning at least $1 million will no longer benefit from long-term capital gains tax rates. These ultra high net worth individuals will have to pay ordinary income tax on their long-term capital gains.
Elimination of Step-Up in Basis
Increased Income
Increased Social Security Taxes
Increased Corporate Taxes
Doubling of GILTI Taxes
Phase-Out of Qualified Business Deduction
