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November 3, 2020

Cross-Walk of the Trump and Biden Tax Plans

Tax Plans

President Donald Trump and Democratic presidential nominee Joe Biden sought to distinguish their policies and initiatives, particularly when it come to their plans for future tax changes. Our chart provides a high-level comparison of some of the key provisions that may be up for further modification depending on the official outcome from the election. Many of these provisions involve further adjustments to the tax reform law commonly known as the Tax Cuts and Jobs Act (TCJA)

2020 Election Tax Plans

Provision

Current Law

Trump Proposals

Biden Proposals

INDIVIDUAL

 

 

 

Income Tax Brackets

Top tax rate 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly)

 

TCJA tax bracket changes expire after 2025

Save an unspecified group of middle class taxpayers 10% possibly through rate reductions

 

Make expiring lower rates permanent. Make expiring TCJA provisions permanent

Increase the top individual tax rate to 39.6% from 37% for those with income more than $400,000

Deductions

2020 basic standard deduction $12,400 for single filers and married filers filing separately, $24,800 for married filers filing jointly and $18,650 for heads of household for 2020. 2021 deductions $12,550 for single/married filing separately, $25,550 for married filing jointly, and $18,800 for heads of household

 

Personal exemption and most individual deductions suspended through 2025.

 

State and local taxes (SALT) deduction capped at $10,000.

Extend the higher basic standard deduction and other deductions enacted by the TCJA that are scheduled to expire after 2025

 

Make expiring TCJA provisions permanent

Limit the benefit of itemized deductions to 28%

 

Restore Pease limitation on itemized deductions taxpayers with income above $400,000

 

 

Capital Gains & Net Investment Income Tax (NIIT)

Top tax rate for capital gains and qualified dividends 20% for income over $441,450 for individuals and $496,600 for married couples filing jointly

 

3.8% NIIT

Would consider indexing capital gains for inflation

 

Cut maximum capital gains rate to 15%

Increase the top marginal income tax rate on long-term capital gains to 39.6% for taxpayers with income over $1 million annually

 

Retain the NIIT

Estate & Gift Tax

For 2020, the exempt amount for estate and gift taxes is $11.58 million. After 2025, this amount is scheduled to revert to the pre-TCJA indexed amount of approximately $5.8 million

 

Transfers of appreciated property at death get a “step-up in basis”

Make expiring TCJA provisions permanent

Eliminate step-up in basis rule that allows people to pass capital gains to heirs without tax after death

 

Return exemptions and maximum rates to 2009 levels.  Exemption to $3.5 million for individual and $7 million for married couple.  Maximum rate increased to 45%

BUSINESSES

 

 

 

Corporate Tax Rate

21% Rate

No change

Increase to 28%

 

Impose a new corporate minimum tax on corporations with book income over $100 million

 

Impose a tax penalty on corporations that ship jobs overseas in order to sell products back to America

QBI

Taxpayers other than C corporations generally are allowed to deduct 20% of QBI from a partnership, S corporation, or sole proprietorship, as well as 20% of qualified REIT dividends and qualified publicly traded partnership income

No change

Phase out QBI deduction for taxpayers with income over $400,000

 

Additional Business Tax Credits

The 2020 presidential candidates also expressed different views for corporate tax credits. President Trump advocated for credit that would encourage companies to bring supply chains back from overseas to the U.S.

A Biden plan would make several tax credit changes, including:

  • Establish a “Made in America” 10% advanceable tax credit for companies on a broad range of investments designed to create manufacturing jobs in the U.S.
  • Expand the New Markets Tax Credit (NMTC) program to provide $5 billion in support every year, and make the program permanent
  • Establish the Manufacturing Communities Tax Credit
  • Impose a tax penalty on drug manufacturers that increase the costs of their brand, biotech, or abusively priced generic over the general inflation rate
  • Expand the work opportunity tax credit to include military spouses
  • Expand the low-income housing tax credit
  • Create a new childcare construction tax credit to encourage businesses to build childcare facilities at places of work. Employers will receive 50% of the first $1 million of construction costs per facility

International Tax Differences

For international businesses, President Trump has supported a 10.5% tax rate for companies to bring supply chains for medicines and related products back to the U.S.

Democratic nominee Joe Biden on the other hand has discussed closing loopholes in the current regime, including doubling the Global Intangible Low-Taxed Income (GILIT) rate to 21%, and implementing anti-inversion regulations and penalties. He also supports a 10% offshoring penalty surtax on profits from any production by a U.S. company overseas for sale on American soil.

For More Information

For more information about how the election affects taxes, please contact a member of our team.

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Copyright © 2020, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

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