2021 Potential Tax Law Changes
Following the 2020 election, President-elect Joe Biden has plans to change the Federal tax law. However, any tax law changes are dependent on Congress approval. The Democrats have secured the majority in the House of Representatives, but Senate majority is still undecided and will not be declared until Georgia’s two run-off races conclude in January.
If either Republican candidate wins their respective run-off race, the Republican party will secure Senate majority. Conversely, if the Democrats are able to win the two run-offs, President-elect Joe Biden will be in a position to enact many of the proposed tax law changes listed below.
Individual Tax Changes
- New top rate of 39.6% for individuals with over $400,000 in taxable income
- Long-term capital gains and qualified dividends rate of 39.6% for income over $1,000,000
- Itemized deduction phase out beginning at taxable income over $400,000
- Full 12.4% social security tax on earned income over $400,000
- No social security taxes on earned amounts between $137,700 and $400,000
- Qualified business income phase out over $400,000
- Increased tax credits for child and dependent care
- First-time home buyer credits
Business Tax Changes
- Corporate tax rate increase to 28% from 21%
Estate Tax Changes
- Tax rate increase to 45%
- Tax exemption decreases from $11,500,000 to $3,500,000
- Possible gift tax exemption reduced to $1,000,000
- Elimination of step-up basis
- Possible tax of unrealized gains at death; historic basis would transfer to heirs otherwise
WellsColeman will keep you apprised of possible tax changes and implications related to the upcoming Georgia run-off elections. There may be 2020 tax planning opportunities related to these proposed updates. Please don’t hesitate to contact your trusted WellsColeman advisor if you have questions or concerns about the possible tax changes.