Accounting & Tax Tips

October 15, 2020

The Differences Between the Trump and Biden Tax Plan

With the 2020 presidential election just weeks away and COVID-19 still wreaking havoc on the economy, it’s important for businesses and individuals to understand two candidates’ proposed tax policies. Here is a comparison the Donald Trump and Joe Biden tax plans (as of 10/14/20):

TRUMP VS BIDEN TAX PLAN: BUSINESSES

 

Trump Tax Plan 

Biden Tax Plan 

Corporate Tax Rate

Maintain 21%
Raise to 28%
Impose a 15% minimum tax on book income so no corporation gets away with paying no taxes

Pass-Through Entities 

(1099 Contractors and Limited Liability Companies [LLC] taxed as Sole Proprietors [IRS Form Schedule C], S-Corporations [IRS Form 1120S] and Partnerships [IRS form 1065])
Make 20% qualified business income pass-through deduction permanent
Phase out 20% qualified business income pass-through deduction for taxpayers earning more than $400,000

Tax Cuts for Businesses

Make 100% bonus depreciation permanent
“Made in America” Tax Credits
Expand Opportunity Zones
Double tax rate on Global Intangible Low Tax Income (GILTI) earned by foreign subsidiaries of US firms from 10.5% to 21%
Establish a Manufacturing Communities Tax Credit to reduce the tax liability of businesses that experience workforce layoffs or a major government institution closure
Expand the New Markets Tax Credit and make it permanent
Offer tax credits to small businesses for adopting retirement savings plans
Expand renewable energy-related tax credits, including tax credits for carbon capture, use, and storage as well as credits for residential energy efficiency, and a restoration of the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit
Impose a 10% surtax on corporations that “offshore manufacturing and service jobs to foreign nations in order to sell goods or provide services back to the “American market” 
Establish an advanceable 10% “Made in America” tax credit for activities that restore production, revitalize existing closed or closing facilities, retool facilities to advance manufacturing employment, or expand manufacturing payroll

Payroll Taxes

Under the current plan, the 12.4% payroll tax is divided evenly between employers and employees and applies to the first $137,700 of an individual’s income
*Trump issued an executive order to temporarily postpone social security tax for employees from Sept. 1 through Dec. 31, 2020. He has indicated he would make this temporary reprieve permanent
Maintain the 12.4% tax split and the $137,700 cap but apply the Social Security payroll tax on earnings over $400,000

Business Energy

Repeal renewable energy investment credit
Eliminate accelerated depreciation for renewable energy property
Reform and extend incentives that generate energy efficiency and clean energy jobs
Incentives for carbon capture technology
Incentives for manufacturing facilities making energy-efficient upgrades

TRUMP VS BIDEN TAX PLAN: INDIVIDUALS

 

Trump Tax Plan

Biden Tax Plan 

Individual Tax Rates 

Maintain 37% and make it permanent
No limit on itemized deductions
10% “Middle Class” tax cut
Reduce 22% tax bracket to 15%
Raise to 39.6%
Cap value of itemized tax deductions at 28% for taxpayers earning more than $400,000

Capital Gains

Maintain maximum capital gains rate at 20%, and maybe lower to 15%
39.6% on income above $1M

Estate Tax

Maintain current “step-up” in asset value and make permanent
Eliminate “step-up” basis for inherited capital assets
Restore estate tax rates to “historic norms”

Personal Energy

Eliminate credits for electric vehicles
Repeal residential energy efficient property credit
Restore full electric vehicle credit
Reinstate tax credits for residential energy efficiency

Child and Dependent Care Tax Credit

Maintain $3,000 tax credit for one person; $6,000 tax credit for one or more
Increase credit to $8,000 for one person; $16,000 for two or more

Child Tax Credit

Maintain $2,000 tax credit, which $1400 of this credit is refundable, for each child 16 or under, and $500 for dependents other than children 16 or under
Increase credit to $3,000 for each child ages 6 to 17, and $3,600 for children under 6, making it refundable and advanceable during the Coronavirus crisis

First-Time Homebuyer Credit

N/A
Refundable, advanceable tax credit of up to $15,000

Education

Provide a tax credit for individual and corporate donations to state-authorized organizations that sponsor scholarships
Exclude forgiven student loan debt from taxable income

Travel Tax Credit

Credit up to $4,000 ($8,000 for married couples filing a joint return), plus an additional $500 for each child age 16 or younger for travel-related expenses within the U.S.
N/A

For more on the Trump and Biden Tax Plans:

Donald Trump: https://www.donaldjtrump.com/media/trump-campaign-announces-president-trumps-2nd-term-agenda-fighting-for-you/ 

Joe Biden: https://joebiden.com/two-tax-policies/ 

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