Tax planning is an exercise that many individuals visit with their tax advisors in the later months of each year to ensure that they are taking advantage of all of the potential tax opportunities that are available for their specific situation. This year, being an election year, throws a wrench in the typical considerations of tax planning as both candidates have very different ideas of what Federal tax law will look like in the upcoming years. President Donald Trump signed into law the Tax Cuts and Jobs Act (TCJA) in December of 2017 which implemented numerous changes into the tax law that took effect for tax years beginning 2018. Notable items within TCJA are currently set to expire in 2026 but if there is a change in the presidency then the existing tax law may be repealed and replaced with the tax policies of the Democratic candidate Joe Biden.
Below is a chart which summarizes the high-level differences between the tax policies of Trump and Biden:
|INDIVIDUAL TAX||Tiered tax brackets with a maximum rate of 37%
Capital gains are taxed between 0% and 20% dependent upon your tax bracket.
|Top tax rate will remain at 37% but adjustments to reduce 22% tax bracket down to 15%.
Retain tiered capital gains rates.
|Increase top tax rate to 39.6%.
Impose and additional 12.4% payroll tax on wages over $400,000.
Retain tiered capital gains rate but increase top rate to 39.6% on income above $1mm.
|CORPORATE TAX||21% corporate tax rate||Retain 21% tax rate||Increase corporate tax rate to 28%.
Imposition of a minimum tax on corporations with book profits of over $100m.
|BUSINESS TAX||100% bonus depreciation on qualified assets
20% Qualified Business Income Deduction (QBID) for qualifying businesses.
Qualified Opportunity Zone (QOZ) tax deferrals for real estate investments in economically-distressed areas.
|Make 100% bonus depreciation and Qualified Business Income Deductions permanent.
Expand the Qualified Opportunity Zone areas.
|No specific proposal on depreciation but may be impacted by AMT changes.
Retain QBID but phase out deduction for filers with income over $400k.
Reform aspects of current QOZ program.
|NEW TAX CREDITS||Implement a “Made in America” tax credit and creating a tax credit for bringing jobs back from China.
Some form of extension of current Child Tax Credits.
|Domestic manufacturing tax credit.
Reestablishes the First-Time Homebuyers’ Tax Credit.
Expansion of New Markets, Child, and Renewable Energy Tax Credits.
If you believe that you would benefit from tax planning, in regards to the election or in general, feel free to reach out to a member of our team. This message is not intended to constitute legal or tax advice.