The Biden administration has been hinting about a possible tax increase. This increase would be the first since 1993. They wish to fund the recent stimulus packages approved to aid the COVID pandemic recovery.
My readers should understand that these are all just potential changes; nothing has been proposed, much less voted on, nor passed in Congress.
The changes being discussed:
- A corporate tax increase from 21 to 28%
- Increase on taxpayers making more than $400,000 a year
- Estate tax expansion (currently for $11.70 million or more)
- Paring back tax preferences on LLCs and other pass-through businesses
- Higher capital tax rates for those making over $1million/year (currently 20% for $441,451 or more)
The plan is not to put everything into one bill; increases will be part of infrastructure and job packages and repealing some former President Trump’s 2017 tax cuts that disproportionately benefitted corporations and wealthy individuals.
Tax Policy Center conducted an independent analysis of Biden’s tax plan and found that it would raise around $2.1 trillion over ten years.
As you can see, the bottom 90% (households making less than $158,002/year) will benefit or be unaffected by the plan; the majority of the plan affects those making $400,000+ which is only 1.8% of taxpayers but earning about 25% of the nation’s income, the top 1% ($538,926+ annually) and 0.1% (approximately 2.5million annually) are the most impacted.
Sen. Joe Manchin of W.Va. and others have pushed back, first saying that repealing the Trump tax cuts would be “ridiculous,” but he later stated that, “Everything’s open for discussion.”
According to Bloomberg, tax increases passed would likely not take effect until 2022, noting that some lawmakers have called for Biden to hold off while the pandemic and its unemployment effects remain.
For the time being, it’s best to focus on what you can in the reduction of your taxes. I have written an eBook, entitled “Best Tax Strategies for a Successful Retirement” that can help you best plan for taxes in retirement so that current laws and any changes will have a minor effect. To request the ebook, email us at: info@strategicassetpreservation.