When not hammering on each other, the US Congress is still hammering away at President Biden’s proposed $3.5 trillion tax plan.

The Biden Administration aims to do lots of “good” with the increased tax revenue this plan is projected to generate. Programs like free continuing education, financial support to children and families, and tax cuts for the middle and working classes are all on the docket.

But of course, someone has to pay for all of this.

It’s still not clear when this new legislation will pass. But one way other, before year’s some version of this legislation will be passed into law. And once again, the tax code will be upended, and we’ll all be sent scrambling.

The real question at this point is: What will the final bill actually look like? We’ve seen the early drafts first introduced this spring. But in the intervening months, much has been added and subtracted.

Let’s take a look at where the proposed tax plan currently stands…

The President’s tax plan includes three parts. The American Rescue Plan (already enacted). The American Jobs Plan. And the American Families Plan.
Here’s a snapshot of each portion of Biden’s entire plan.

The American Rescue Plan

As noted above, this portion of his plan has already been passed. You can see the details covered in a prior eNewsletter here.

Meanwhile, here’s a quick summary of the key points…

Child Tax Credit – Qualifying taxpayers will receive $3,600 per child under age 6 and $3,000 per child ages 6 through 17 as refund and paid in advance.

Child + Dependent Care Tax Credit – Certain families, heads of households, and legally designated caregivers are eligible for tax credits in the form of $4,000 per qualifying dependent and $8,000 for two or more for qualifying dependents.

Earned Income Credit (EIC) – Qualifying workers age 19 and up are now eligible for this credit, which is designed to offer additional support for low-income workers (the previous minimum age was 25).

Affordable Health Care (ACA) Premium Reductions – Those receiving healthcare coverage enacted through the American Rescue Plan are eligible for tax credits, further offsetting healthcare expenses over the next two fiscal years.

The American Jobs Plan

This proportion of Biden’s plan is still in the “proposal” stage. And several of its tenets are at the center of the current legislative debate in congress. Here are the key points…

• Raising the corporate tax rate to 28%, up from 21%.
• Increasing the global minimum tax rate for multinational corporations to 21%.
• Levying a 15% minimum tax on “Book Income” (the amount of income corporations report on their financial statements to their shareholders).

The American Families Plan

Also still in the “proposal” stage, this portion of Biden’s plan is another subject of hot debate in congress. Here are the key points…

• Raising the income tax rate on taxpayers in the top bracket (individuals earning over $400k and couples earning over $500k) from 37% to 39.6%.
• Restructuring long-term capital gains taxes, currently set at 20%, to be taxed as typical income (which under Biden’s plan would be 39.6%) for taxpayers earning over $1 million in taxable income annually.
• Eliminating the “stepped-up basis” for asset sales allows heirs to sell inherited assets without paying capital gains taxes on the asset’s appreciated value.
• Requiring banks, credit unions, and other financial institutions to report all banking transactions from accounts with $deposits of $600 or more.
• Increasing IRS staffing by 15%, adding over 11,000 new employees to seek out under-reported and uncollected tax revenue.

How Will Biden’s Tax Plan Impact Your Finances?

Clearly, aspects of the plan as it stands will not affect many taxpayers. But for those individuals, business owners, and investors impacted by this plan, you could be looking at a serious tax hike.

All of this said, the key takeaway here is the majority of Biden’s plan remains “proposed.” Congress is still hacking away at this legislation, and portions of the above proposal will likely be revised or slashed altogether.

Regardless, it’s wise to be informed and prepared. And as we approach the end of fiscal 2021, I highly recommend scheduling a Year-End Tax Review.

Get in touch here for your FREE consultation.