Five Ways President Biden’s Tax Plan Could Impact Your Finances

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Safe Harbor Law Firm

Posted on

Jun 09, 2021

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Florida - Southwest

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Although President Biden outlined his tax plan during the presidential campaign, conventional wisdom held that Republicans in the Senate would block the implementation of his agenda. Now that Democrats control both the House and the Senate (if you factor in the vote of Vice President Kamala Harris), its worth revisiting some of Bidens proposals.
In general, Biden would like to increase taxes on people earning more than $400,000 per year and repeal a number of provisions in the Tax Cuts and Job Act of 2017. Here are some of the details.

An increase in the top individual income tax rate from 37% to 39.6%.
Elimination of step-up in basis at death. Currently, the step-up in basis allows families to pass capital gains tax-free to their heirs. This is accomplished by stepping up the value of an asset from its original purchase price to its value when inherited, which results in less gain and therefore less tax paid. The step-up in basis significantly reduces capital gains taxes on assets with substantial appreciation, such as personal residences. The Biden plan would eliminate this tax-saving provision.
A reduction in exemptions for estate and gift taxes. These exemptions are currently set at $11.7 million per person and $23.4 per married couple. Biden has proposed restoring estate and gift tax exemptions to their 2009 level: $3.5 million per person for the estate tax and $1 million for the gift tax.
Capital gains treated as normal income. For individuals with income over $1 million, long-term capital gains and qualified dividends would be treated as normal income and taxed at 39.6%. This is significantly higher than the current rate of 15% to 20%.
Limiting the tax benefit of itemized deductions to 28% for upper-income individuals.

Of course, President Bidens tax proposals require congressional approval before they become law. Such approval is by no means a certainty. If these proposals do become law, wealthy Americans will have to reevaluate and likely adjust their financial and estate plans.

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Pam Buff Baker, Esq., owner and founder of Safe Harbor Law Firm works closely with clients to meet their legal needs. In particular, Pam works in all areas of Estate Planning, Elder Law, Probate and Trust Administration. Pam graduated magna cum laude from Tulane University, having majored in chemical engineering. Since graduating from Tulane, Pam has worked in sales, marketing, and technical support for Eka Chemicals (part of Akzo Nobel), a company division that supplies water purification and treatment systems. Later, Pam moved to Naples, Florida. Since then, Pam graduated summa cum laude from Ave Maria School of Law, where she was Associate Editor of the Law Review and a scholarship winner. During her time at Ave Maria School of Law, Pam worked in the legal department of Arthrex and interned for several local law firms. Pam is a champion golfer, having been a varsity player at Tulane, inducted into the Hall of Fame. She was an All-American golfer, three-time conference champion, conference player of the year, and student athlete of the year. When she has free time, Pam likes to play golf and go to the beach and pool with her family. Originally from Chicago, Pam has lived year-round in Naples, Florida since 2005.

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