Thread by @roncaruthers

1. Joe Biden's Tax Plan:

They're going up.

#shortestthreadever

Kidding.

Well, they ARE going up, so that part isn't wrong, but here are the specifics, as best we can tell....for now*

*subject to change if Uncle Joe changes his mind, so this is hypothetical for now

1b. But, if you want to know what is likely to happen, read on........

2. The maximum tax rate is going up on income over $400,000 a year – from 37% presently to 39.6%. 

Also, you currently don't pay the highest rate until you make $622,000....so the tax is not only going up, but you're getting there sooner.

3. Itemized deductions are getting capped at 28% of income for those earning more than $400,000 a year

AND they are imposing an additional 12.4% Social Security payroll tax on those in the highest bracket.

4. However, they are eliminating the TCJA’s $10,000 cap on itemized deductions for state and local taxes. 

So, if you live in a high tax state like NJ, NY, or CA, you WILL be able to write off more of those taxes than you currently do now.

5. The Child Tax Credit would be made fully refundable (meaning you can get money back even if you didn't pay in and don't owe...)

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 six.

6. They are also discussing expanding eligibility for the Child and Dependent Care Tax Credit.

The change would increase the credit from a current maximum of $3,000 to $8,000 and provide a ceiling of $16,000 for multiple dependents.

7. Under current law, the maximum effective federal income tax rate on net long-term capital gains and qualified dividends recognized by individual taxpayers is 23.8%.

But....that is about to change, and this is the 2nd worst part of the new tax plan.

8. Under the Biden plan, net long-term gains (and presumably dividends) collected by those with incomes above $1 million would be taxed at the same 39.6% maximum rate that is proposed for ordinary income and net short-term capital gains.

9. This here is the WORST of the new tax plan:

Repeal the present law “step-up in basis” rule that increases the tax basis for inherited assets to their full fair market value upon death.

Basically, in English, this means that if you currently inherit a house,

10. You get the house at what it's worth the day your family member died, NOT what they paid for it.

So, this has saved BILLIONS in taxes.

Not anymore if this goes through.

This is the one you should probably call and fight about, because it changes precedent from 30+ years.

11. Speaking of estate tax, they're cutting the current amount of 11 million roughly in half.

You may not think this applies to you, but remember, the IRS is the one that says what your business is worth....and this will have a huge impact as businesses get liquidated to pay tax

12. For 2020, the Social Security payroll tax is 6.2% each for the employee and employer on wages up to the contribution base of $142,800 for 2021. 

Self-employed individuals are liable for Social Security tax of 12.4% on their net profits.

13. But, like I mentioned earlier in this thread,

The Biden plan would impose an additional Social Security payroll tax of 6.2% each on employer and employee on all earned income of $400,000 or more.

14. And, of course, coporate taxes are getting raised too.

2 main changes are:

Raise the statutory rate from 21% at present to 28%.

Add a 15 percent minimum tax for corporations that have over $100 million in profits (book profits not taxable income)

15. And, while this last one probably won't affect you, it WILL raise the prices you pay on stuff, since corporations don't pay taxes, their customers do:

It would increase taxes from 10.5% to 21% (up to 26.5% in 2026) on Global Intangible Low-Taxed Income (GILTI

16. So there you have it.

Basically taxes are going up in every direction at every level.

BUT, if you live in a high tax state, you should be able to write more of your state taxes off than you have the last few years.

17. Remember what I always say: no one cares about your money as much as YOU do, so be sure to learn every legal strategy to lower your taxes so YOU get to keep more of YOUR money.

If you feel bad, then donate your savings to the charity that YOU choose.

18. And, also remember, no, putting money into a 401k, IRA ore 403b doesn't 'save' you tax...

...it merely postpones paying the tax AND the calculation OF the tax.

/end.