Trump vs. Biden Tax Proposals

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Written by HORNE Tax

The person elected president of the United States in November 2020 will have a unique and challenging task — managing the nation's economic recovery after a global pandemic that caused unemployment to surge to levels not seen since the Great Depression.

One way to manage the economic recovery is through changes to the current tax law. This chart examines the differences between the proposals under current President Donald J. Trump and Democratic nominee Joe Biden. Click here to download the chart.

Trump

 

Biden
Proposes to make 2017 Tax Cuts & Jobs Act (“TCJA”) tax rate reductions permanent (top rate of 37%). Possible further tax rate cut for lower and middle-income taxpayers

Individual Tax Rates

 Increase top ordinary income tax rate to 39.6% (pre- TCJA rate) on taxable income above $400,000.
Proposed rate reduction from 20% to 15% on capital gains. Capital Gains & Dividends 39.6% rate for individuals with taxable income above $1,000,000.
Retain 20% deduction under Section 199A Passthrough Income Phase-out 20% deduction under Section 199A for taxpayers with income over $400,000.
Proposes to make permanent the TCJA changes to itemized deductions set to expire in 2025 – which are currently not capped. Itemized Deductions Restore pre-TCJA limitations for those with taxable income over $400,000. Cap tax benefit of itemized deductions at the 28% tax rate. End state and local tax deduction cap of $10,000.
No changes proposed Social Security Tax Imposes additional employer and employee social security payroll tax of 12.4% on wages or self-employment income over $400,000
Require a valid Social Security Number to claim the credit Child Tax Credit Increase credit from $2,000 to $8,000 for one child and $16,000 for 2 or more. Credit phase out for taxable income between $125,000 and $400,000.
No changes proposed Student Loans Special taxable income exclusion for certain student loan forgiveness where debtor is enrolled in an income-based 20-year repayment plan
Extend current $11.6 million estate exemption set to expire in 2025. Retain step-up in basis for inherited property Estate Tax Allow increased current $11.6 million estate tax exemption to expire in 2025 reverting it to around $5.8 million. Eliminate step-up in basis for inherited property.

Retain current corporate tax rate of 21%

No plan to reinstate the Alternative Minimum Tax repealed by the TCJA

 Corporate Tax Rate

Increase corporate tax rate from 21% to 28%

15% minimum tax on book income for corporations earning more than $100 million in the U.S. but no U.S. income tax.

10% offshoring penalty surtax on the profits from any production by a U.S. company overseas for sale on American soil, making the overall tax rate on those profits 30.8%.

Retain like-kind exchange deferral provisions

 Real Estate Transactions

Repeal like-kind exchange deferral provisions for taxpayers earning more than $400,000.

Extend TCJA 100% Bonus Depreciation provisions past 2025

 Bonus Depreciation

Reverse TCJA 100% Bonus Depreciation provisions.

 

We'll continue to keep you updated on any tax changes. For more information, contact a member of the HORNE Tax team.