Proposed Changes to the Tax Code
The PROPOSED new tax code changes from President Biden would change a great deal of what was installed by former President Trump. That’s not necessarily a bad thing, as the Trump tax reductions were meant to stimulate the economy to the point that we started reducing the national debt load (which for many reasons did not happen, and the annual deficit grew even greater). Biden’s plan includes changes to the payroll tax, individual income tax, and estate and gift taxes:
The people earning over $400,000 would pay more in several different ways;
Increases individual income tax rate for taxable incomes above $400,000 from 37 percent back to 39.6 percent.
Taxes long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent on income above $1 million.
Caps the tax benefit of itemized deductions to 28 percent of value for those earning more than $400,000, which means that taxpayers earning above that income threshold with tax rates higher than 28 percent would face limited itemized deductions.
Phases out the qualified business income deduction (Section 199A) for filers with taxable income above $400,000.
Expands the estate and gift tax by restoring the rate and exemption to 2009 levels (3,500,000) from the current 11,580,000
Then the younger worker or lower income earners gain some fairly large benefits;
Substantially Increases Child and Dependent Care Tax Credit (CDCTC) from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents) and increases the maximum reimbursement rate from 35 percent to 50 percent.
For 2021 expands Child Tax Credit (CTC) from a maximum value of $2,000 to $3,000 for children 17 or younger, with a $600 bonus credit for children under 6.
Reestablishes the First-Time Homebuyers’ Tax Credit and would provide up to $15,000 for first-time homebuyers.
A few items for everyone;
Expand the Earned Income Tax Credit (EITC) for childless workers aged 65+
Energy Credits are expanded
There’s more detail of course and these again are not necessarily going to happen at all, or as proposed, but with the D`s in charge of our governing bodies, they are likely.
Our hope is that this isn’t just “Tax the rich and more for the poor”, and that what passes, although doing some of that, at least makes the ridiculous spending of the government pay for itself and reduces the deficit. We will see.