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President Joe Biden campaigned for a promise to raise taxes for wealthy Americans and businesses. His key tax proposals would increase taxes for those earning more than $ 400,000 a year and increase corporate tax rates from 21% to as much as 28%.
Although his tax plan will primarily affect the bottom line of the richest Americans, low- and middle-income households can benefit from increased tax credits.
To understand how these policy changes and proposals could affect you, use our calculator to determine how much you might be paying under Biden’s tax plans.
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Tax Contributions & Deductions
Under Biden’s proposed tax plan, you’ll pay $ 5,600 more than under the current federal tax plan under Trump
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Comparison of both tax results
European summer time. Federal taxes
European summer time. Federal Refund
- Your federal marginal tax rate remained at X%
- Your effective tax rate is now x% (previously y%).
Disclaimer: This tool is for educational purposes only and should not be used for tax preparation purposes. Your actual tax payment or refund may vary based on several factors. In this tax calculation, certain deductions and credits are omitted for the sake of simplicity. We recommend that you seek advice from a tax advisor to determine how changes in tax codes would affect your financial situation.
Frequently asked questions (FAQs) about Biden’s tax plan
Will these changes affect the 2021 tax season?
The changes won’t affect the 2020 tax returns that most Americans will file in the spring of 2021. At this point, most of Biden’s tax plans are proposals and have not been put to a vote in Congress.
However, Biden signed the American Rescue Plan Act in March, which temporarily expands the child, child, and dependent care tax credit and earned income tax credit for the 2021 tax year only.
Will the federal tax brackets change?
Yes, but only for the richest Americans. Individuals earning more than $ 400,000 a year would see a major change in Biden’s tax plan. The top-tier tax rate would decrease from the current maximum of 37% to the maximum before the Tax Reduction and Jobs Act of 39.6%.
If you make more than $ 1 million annually, the tax rate on long-term capital gains would increase. This is a special tax levied on assets held for more than a year and qualifying dividends.
According to the current tax law, capital gains are taxed at 0%, 15% or 20% depending on taxable income and registration status. Another 3.8%, net investment tax, would be levied on high-income individuals whose 2020 modified adjusted gross income is above $ 200,000 ($ 250,000 for married joint taxpayers). Biden’s tax plan calls for a high-end capital gain tax rate to be increased to 39.6% for those earning $ 1 million or more. This means that those who earn more can be taxed up to 43.4%, including the additional 3.8% tax.
What happens to tax credits?
Biden has no plans to levy taxes on low- to middle-income taxpayers. However, this group can expect some tax credits to change in 2021, which means they may have more cash in their pockets. These include the child tax credit, the child and dependent tax credit, and the earned income tax credit.
Biden also plans to reintroduce the home buyer tax credit, introduce a tax credit for those saving on a 401 (k) retirement plan, and create a tenant tax credit.
What are the Child Tax Credit Advanced Changes?
Biden’s US bailout plan increased the child tax credit for tax year 2021 only. Qualified child credit increased from up to $ 2,000 to up to $ 3,600 for children under 6 and up to $ 3,000 for children 6-17 years of age. The credit will now be fully refunded.
Previously, the balance was only partially refundable, with a maximum of $ 2,000 per Qualifying Child under the age of 17.
What are the Child and Dependent Loan Changes?
For 2021, Biden’s tax plan increased eligible child and long-term care expenses from up to $ 3,000 per child to up to $ 8,000 per child (up to a maximum of $ 16,000 for two or more dependents).
Previously, taxpayers could deduct $ 3,000 ($ 6,000 for two or more dependents) from the cost of dependent care on their federal income tax return.
The dependent must be under 13 years of age, a spouse or other eligible person unable to support themselves. The tax credit allowed depends on the taxpayer’s income. This change only applies to the 2021 tax year.
Calculator methodology
This calculator compares Biden’s top tax proposals against the 2020 Tax Act to show the expected tax changes. No other income, deduction, or credit is compared that is expected to remain unchanged even after all of Biden’s tax plans are passed. The posts are based on information from the 2017 Tax Cut and Employment Acts, the 2020 tax brackets and Biden’s core tax policy as follows:
Biden’s main tax policy and proposals
- Increase in tax rate from 37% to 39.6% for households earning $ 400,000 or more;
- Increase the child tax credit from $ 2,000 to $ 3,000 ($ 3,600 for those under 6 years of age).
- Increase child and care dependent credit from $ 3,000 to $ 8,000 per dependent (from $ 6,000 to $ 16,000 for multiple dependents). and
- For households earning more than $ 400,000, deductions are limited to 28%.
Limitations of this calculator
- The estimated taxes or planned refunds do not take into account EITC Tax Credit, additional Medicare taxes levied on high-income individuals, capital gains taxes, or self-employment taxes, which may affect your tax position.
- The child and care credit does not take into account relatives and spouses who are physically or mentally incapable of looking after themselves for more than 13 years.
- We have changed the tax brackets for 2020 to reflect Biden’s tax proposals. For single people and heads of household, we’ve adjusted the 35% tax bracket to reflect the $ 400,000 income limit. For married couples filing together, we’ve adjusted the 32% and 35% tax brackets to reflect the upper income limit of $ 400,000. For all taxpayers, we’ve replaced the 37% with Biden’s proposed 39.6% tax increase for income over $ 400,000.