Will Joe Biden Increase Your Taxes?

Posted on Saturday, June 26, 2021

Will the power change in Washington and increased government spending result in a tax increase for 2021 and beyond?  With tax rates at historically low levels, many experts expect a tax increase for some taxpayers as soon as this year.  Nothing has been decided at this time, but we can take a look at President Biden's current proposals for a clue as to what might happen. 

Individual Tax Rates

Individuals in the upper-income tax brackets are the chief target for tax increases.  Biden is proposing a tax rate increase from 37% to 39.6% for individuals with income over $400,000.  He would also repeal the lower long-term capital gain and qualified dividend rate for individuals making over $1,000,000, perhaps even retroactively to late April 2021.  However, those in the lower brackets would benefit from increased credits for childcare, dependents, and retirement plan contributions.  Corporate taxpayers who have been enjoying a 21% flat tax rate would see that increase to 28%. 

Biden is proposing a significant change to estate-related taxation.  He would eliminate the step-up in basis that is currently applied to most appreciated assets at death.  This would result in beneficiaries taking the decedent's tax basis as their own for inherited assets.  He would also reduce the current $11,700,000 estate tax exemption to historical levels, perhaps as low as $3,500,000. 

Social security taxes would also increase under the Biden plan.  Currently, employees and employers stop paying social security tax once wages reach $142,800.  This would continue under the proposal, but once employees reach $400,000 in wages, they would resume paying the tax. 

Other ideas will also be part of a new plan, but we will have to wait and see what gains traction in the new Congress.  DWD will continue to monitor these changes and assist our clients in navigating any new laws. 

Contributed By: Mark Westerhausen, CPA , MST | Director | DWD CPAs & Advisors

Posted in Tax Topics For Individuals, Tax And Accounting Topics For Business

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.