Now that Joe Biden won the US election, concerns about how Joe Biden’s presidency will affect tax regulations started to arise.
One of the significant arguments President Donald Trump relied on during his debates was that “Joe Biden will raise your taxes.”
President Donald Trump has worked highly on lowering tax rates in the states, especially with the Tax Cuts and Jobs Act (TCJA) implementation in 2017, which had to reduce the federal income tax rate from 35% to 21%.
But what about plans in regards to taxation? How will his presidency affect your taxes?
That’s what we will tackle in this article.
– Corporate income tax
After the corporate income tax decrease from 35% to 21%, as stated above, Biden’s plan concerning business tax included an increase in the corporate income tax rate from 21% to 28%.
A new corporate minimum tax will also be introduced to corporations who make in on book profits 100 million dollars and more. The corporate minimum tax rate is 15%.
It has the same structure as the alternative minimum tax. The corporation will compare the corporate minimum tax and the corporate income tax and pay whichever is greater.
This will highly impact large corporations and fortune 500 companies.
– Rich Americans and higher tax rates
Biden has planned to increase the individual income tax and the payroll tax. However, this increase will only involve households with an income of 400,000$ a year and higher.
This means that this raise will impact wealthy Americans without middle-class households.
The maximum individual income tax rate will be 39.6% instead of 37% before implementing the TCJA.
Not only that, long term capital gains and qualified dividends will be taxed at the income tax rate of 39.6% instead of the capital gain tax rate on all income exceeding 1,000,000$.
Taxpayers with an income of 400,000$ and above with an income tax rate of 28% and more will face limits regarding tax deductibles.
Concerning the payroll tax, a 12.5% tax will be imposed on individuals earning 400,000$ and more.
– Tax incentives for middle and low classes
Biden has intended to increase the amount that a caregiver can be entitled to from 3,000$ to 8,000$ and 16,000$ in case there were several dependents.
Also, people without children will be entitled to higher credit, which will be determined in the future.
Biden has brought back some of ex-President Obama’s tax credit plans, such as the entitlement to have a 15,000% credit for first-time homebuyers.
With Biden’s business tax plan, it is apparent that he overruled a lot of President Trump’s decisions. Is it better or worse? Several opinions are addressed on the table, and to be 100% sure, all we can say is that time will tell.
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