With the 2020 election decided and President-elect Joe Biden's inauguration fast approaching, it's time to look at how policy positions as President of the United States might affect your estate planning and tax planning over the next four years. Luckily, President-elect Biden released detailed information on his tax plans for the country.
President-elect Joe Biden’s plans include:
- Increasing the Child Dependent Care Tax Credit to $8,000 and the Child Tax Credit up to $3,600 for children under six. Biden also proposed making the amount refundable regardless of a taxpayer's income level;
- Changing how we calculate global intangible low-taxed income (GILTI) to reduce offshoring of production and jobs from the U.S.;
- A first time home buyer credit of up to $15,000;
- Raising individual income tax for those with income above $400,000, increasing the corporate income tax rate, and creating a corporate minimum book tax.
Overall, the Tax Foundation indicates that Biden's plans would decrease the tax rate for the top 1% of income earners by an average of 6.5% and decreasing income tax for all taxpayers by 1.7% on average.
Under the current law, the lifetime estate exclusion amount is $11,580,000 per taxpayer or $23,160,000 per married couple. The current tax rate for estates over that amount is 40%. The current estate tax exemption will expire in 2025. If it expires, the exemption will revert to $5 million per individual or $10 million per married couple.
Biden has not indicated a specific estate tax amount that he favors; he has said he would like to see the exemption return to “historic norms” rather than have the current rates become permanent. Presumably, this means he would like the estate tax exemption to return to $5 million per individual and $10 million for a married couple.
Even before Biden takes office, he has indicated he'd like to see Congress pass another Coronavirus stimulus bill before Congress's previously implemented final COVID-19 relief measures expire on December 31, 2020. Biden's current economic plan adopts additional unemployment measures but may not include another round of stimulus checks going directly to taxpayers.
Change Hinges on Congress
While Biden campaigned on a wave of drastic changes to the tax code, it's important to remember that many of his advanced plans depended on a “blue wave” sweeping the Democrats into control of the Senate as well as the House of Representatives. Depending on what happens in the two run-off elections for Georgia's Senators, Biden may not be able to count on Democratic control to force through his policy plans. Even if the Democrats win both Georgia Senate seats, the Senate will still be split 50-50, with Vice President Kamala Harris as the deciding vote. Rather than attempt to pass a one-sided tax plan, Biden may need to fall back on what many says he does best – compromise
No matter what happens after the inauguration and a new administration takes over, we can help you with your estate plan and explain how new tax laws will affect you. Contact the experienced Orlando estate planning and tax attorneys of Veliz Katz Law for a consultation, and we can discuss your options. Call today 407-849-7072.