How could the latest Biden tax plan affect you?

Can the Democrat’s agree on a reconciliation bill? President Joe Biden’s tax proposal continues to be revamped as they inch closer to the finish line. And it appears that a majority of former President Donald Trump’s 2017 tax cuts will remain in place.

It is still unclear what measures will make the final cut as negotiations continue. What revenue-raisers will pass to help pay for the $1.75 trillion social-spending bill? The White House recently released a fact sheet including the expected components. The fact sheet indicates that some of Biden’s core proposals, such as increasing the corporate rate, the top individual income tax rate, and the capital gains rate, are likely out, while other unique ideas, such as a minimum tax on the profits of corporate financial statements and a surtax on millionaires, are taking their place.

PROBABLE

15% corporate minimum “book” tax
15% global minimum corporate tax
Expansion of 3.8% investment income tax
IRS audit expansion
Tightening of international corporate tax rules
Limitation on business losses
Surtax on millionaires
Levy on corporate stock buybacks

UNLIKELY

Billionaire’s tax
IRS bank account reporting
Eliminating carried interest
Corporate rate increase
Higher top individual tax rate
Capital gains rate increase
Estate tax expansion

DEFINITELY NOT

Eliminating step-up in basis on inherited assets

Democrats are also considering a five-year suspension of the $10,000 deduction limitation for state and local tax (SALT) on the federal return. Democrats have been looking at several options for SALT relief and the temporary suspension has become the leading option in discussions surrounding the SALT deduction limit. One option under consideration is suspending the cap for all taxpayers from 2021 to 2025. The $10,000 cap would then be reinstated from 2026 to 2030. Another option lawmakers are considering is suspending the cap for 2022 and 2023 and re-imposing the $10,000 limit for 2024 through 2027. However, there is currently some pushback in Congress which could be enough to block the bill.

At this point, it is impossible to say which proposals will survive and be enacted into law.

For additional considerations, please reach out to Kari M. Erickson, CPA, MST, Director, or contact our Tax Solutions team at Mahoney to be of help to you in any way.

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