President Biden’s Tax Plan
President Biden’s tax proposals differ significantly from the tax policies of the Trump Administration. His core tax proposals would raise taxes on wealthy Americans and corporations while benefitting more low-and middle-income households with increased tax credits. Here’s how Biden’s tax plan would affect individual taxpayers and corporations if passed by Congress.
Tax Changes for Individual Taxpayers
Increase the top individual federal income tax rate for taxable incomes above $400,000 from 37% under current law to the pre-Tax Cuts and Jobs Act level of 39.6%.
Tax long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 % on income above $1 million.
Restore the Pease limitation on itemized deductions for taxable incomes above $400,000.
Cap 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.
Eliminate the present law “step-up in basis” that allows families to pass capital gains tax-free to their heirs.
Two separate credits related to children are both included as part of Biden's tax plan.
The Child and Dependent Care Tax Credit would be expanded from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents).
The Child Tax Credit would be made fully refundable and rise from $2,000 to $3,000 per child for children ages 6 to 17, with a larger credit of $3,600 per child allowed for children under age 6.
Create a tax credit of $5,000 for informal caregivers.
Impose additional social security taxes on wages or self-employment income over $400,000
Tax Changes for Business Taxes
Increase the corporate tax rate from 21% to 28%. To prevent profitable companies from paying no tax, all corporations would be subject to a 15% percent alternative minimum tax on book profits of $100 million or more.
Double the tax rate on Global Intangible Low Tax Income earned by foreign subsidiaries of US firms from 10.5% to 21%.
Phase out the qualified business income deduction (Section 199A) for filers with taxable income above $400,000.