With the presidential election about two weeks away, we wanted to highlight President Trump and Democratic presidential candidate Joe Biden’s tax plans. The election results could drastically change the tax rates for both individuals and businesses in the country.
President Trump has not really talked a lot about taxes in his campaign speeches and debates, choosing instead to focus on the economy and policies surrounding Covid-19. When he was campaigning during the 2016 election, he touted lowering the corporate tax rate and simplifying the tax code. After elected president, he worked with Republicans in Congress to pass the 2017 Tax Cuts and Jobs Act (TCJA), which implemented the following changes to the tax code:
- Lowered the corporate tax rate from a high of 38% to 21%
- Repealed the corporate alternative minimum tax
- Lowered the highest individual income tax bracket from 39.6% to 37%
- Increased the standard deduction and eliminated the personal and dependency exemptions
- Increased the child tax credit from $1,000 to $2,000 per child
- Increased the alternative minimum tax (AMT) thresholds for individuals so that most Americans are no longer subject to AMT
- Implemented the Qualified Business Income (QBI) Deduction, which allows an individual to deduct 20% of domestic qualified business income from an S Corporation, partnership or sole proprietorship
President Trump continues to advocate long-term capital gains taxed at a maximum tax rate of 20% . Due to the passage of the TCJA, President Trump does not have many new tax proposals in his re-election campaign. Since most of the provisions in the TCJA expire in 2025, if re-elected, he would most likely try to make permanent the changes he implemented with the TCJA.
Former Vice President Biden, on the other hand, has very different tax plans. If elected, he would like to implement the following changes:
- Increase the top rate back to 39.6% for individuals and lower the adjusted gross income to which the highest rate takes effect
- Increase the top marginal income tax rate on long-term capital gains to 39.6% for those earning over $1 million annually
- Expand the earned income tax credit and dependent care credit and have a refundable $8,000 child care tax credit for a qualifying child or up to $16,000 for two or more children
- Restore the Pease limitation on itemized deductions for taxable incomes above $400,0001
- Restore the corporate income tax rate to 28%. Additionally, Biden would like to impose a minimum tax on corporations with book profits of $100 million or more
In addition to the above tax plans, each candidate has stated his plans for the Affordable Care Act (ACA) put in place by former President Barack Obama in 2010 to extend health insurance coverage to millions of uninsured Americans. President Trump wants to repeal this law, while Joe Biden wants to expand it.
Based on the above, President Trump and Democratic presidential candidate Joe Biden have major differences when it comes to taxation. Hopefully, we will find out soon which direction our taxes will be going. If you have any questions about how a new president will affect your tax situation, please reach out to your Schneider Downs tax advisor.
1 Prior to the TCJA, a limitation on itemized deductions took effect at higher income levels. In 2017, it was $318,700 for married filing joint returns and $261,500 for single filers.
About Schneider Downs Private Client Services
The Schneider Downs Private Client Services practice was developed to attend to the specific and individualized needs of high-net-worth individuals. From robust and complex solutions to efficient and convenient solutions our team delivers the peace of mind that comes from working with experienced and talented professionals who can meet any challenge. For more information, visit Schneider Downs Private Client Services or contact the team today.
