After a whirlwind of an election during an even more unpredictable year, Joe Biden is set to be the 46th President of the United States. In anticipation of a new administration, high-income earners especially are left wondering - how will the Biden presidency affect me financially?
Until Biden takes office and begins enacting changes, we won’t know for sure what to expect. But based on his official campaign platform, past interviews, and projections, we can better prepare ourselves for the potential changes to come.
As Biden prepares to be sworn in, what challenges could this bring to high-income earners over the next four years?
Will Biden raise taxes for high-income earners?
Much of Biden’s tax plan focuses on raising taxes for high earners, corporations, and capital gains. In fact, it’s estimated that approximately 80 percent of tax increases would affect the top one percent of income earners.1
Biden is projected to raise taxes for those earning over $400,000 annually, including individual income, capital gains, and payroll taxes.2 The top federal income tax rate is expected to increase from 37% to 39.6%. It’s important to consider how your state taxes come into play too. High-income earners in states like California and New Jersey could face a total top tax rate of 60%.
Households with an adjusted gross income of $400,000 a year or less will likely see less dramatic tax changes, if any at all.
Will Biden raise corporate taxes?
Under Biden’s proposed tax plan, corporate tax rates are expected to rise to 28 percent, up from the current 21 percent. Additionally, he may set a minimum tax of 15 percent on shareholders’ profits and increase the taxes on foreign earnings of companies overseas.3
How will the Biden presidency impact small businesses?
Employing qualified employees and paying them fairly is a challenge for small businesses when forced to compete with larger corporations. The Biden presidency poses a threat of even higher employment costs, supporting a $15 minimum wage.
Will Biden eliminate real estate loopholes?
If rumors that Biden may eliminate the Section 1031 like-kind exchange become true, real estate investors would lose the ability to utilize this common workaround for tax deferment.
These types of exchanges have taken place in the real estate industry for years and have been a part of the IRS code since 1921.4 Under current law, real estate investors can delay capital gains taxes when they sell properties and direct earnings into new investments - assuming they follow the IRS’s regulations as to what defines eligibility for Section 1031 exchanges.
Will Biden eliminate fossil fuel subsidies?
Biden is pushing to end U.S. fossil fuel subsidies worth billions of dollars a year to combat climate change and reach net-zero emissions within 30 years.6
For oil industry executives, the elimination of fossil fuel subsidies could affect your earnings. As of September 2020, this industry is said to be worth $14 trillion in assets.5
Will Biden reverse the Tax Cuts and Jobs Act of 2017?
The Tax Cut and Jobs Act of 2017 (TCJA) included several advantageous tax changes for high-income earners and business owners — including dropping corporate taxes from 35 percent to 21 percent.7 Biden is predicted to eliminate some aspects of the TCJA, likely reversing certain tax breaks for corporations and high-earners.
Will Biden raise estate and gift taxes?
Biden has been cited as saying he’d likely restore estate and gift taxes to pre-TCJA levels.2 Any eligible assets gifted above that amount would likely be taxed at a rate of 40 percent — unless the Biden administration changes it.8
What can high-income earners expect in a new administration?
We could begin seeing changes soon after Biden takes office. If you’re unsure whether your financial situation could be affected, it’s essential to reach out to a trusted financial professional now. Together, we can create a plan and prepare for what may be coming down the line for you and your future taxes.
Are you unsure of how the new administration will impact your situation? Schedule a time to discuss this with our trusted advisors.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.