TAX PLAN COMPARISION: AN ELECTION PREVIEW
During an election year, there are many opinions and proposals announced from the presidential candidates. To be clear, we are not expressing any political opinion as to the presentation of either political parties platform as it relates to taxes for the upcoming election. Our affiliates at Helium Tax and Maris & Associates created this tax plan comparison for information purposes only to help project what may change regarding tax policy. It is still important that all Americans become educated on the issues, watch the debates and most important of all – VOTE!
|
TAX MATTER |
CURRENT LAW |
REPUBLICAN |
DEMOCRATIC |
|
Tax Rates |
Seven tax brackets: 10%, 12%, 22%, 24%, 43%, 35% and 37% applicable to tax years beginning after December 31, 2017 and before January 1, 2026. |
Considering 10% middle class tax cut. Otherwise, Fiscal Year 2021 Budget would extend the 2017 Tax Cuts and Jobs Act (TCJA) provisions past 2025, making the rates permanent. |
Increase the top rate to 39.6% for taxpayers making more than $400,000 which would result in a tax increase. |
|
Capital Gains |
The top rate is 20% for long term capital gain and qualified dividends. Other rates for taxpayers below 12% tax bracket pay 0% and all other taxpayers pay 15%. |
Seeks to cut the capital gains rate by executive order, would reduce the maximum long term capital gains rate to 15%. |
Tax at top ordinary income rate (39.6%) for taxpayers with over $1 million in income. Would also reform the benefits for the opportunity zone. |
|
Wealth Accumulation |
No taxation on accumulation of wealth, may be subject to estate tax liability |
No wealth tax |
Generally, does not support a wealth tax |
|
Earned Income Tax Credit (EITC) |
Refundable credit for any eligible individual who meets certain criterial. A portion of the credit can be refundable. |
Would extend the expanded provision for eligibility of the credit. A valid Social Security number (eligible for work) would be required to claim the credit. |
Expand the EITC to older workers. Extend dependent care credit to $8,000 and part will be refundable. Provision for 50% to be reimbursed for families making less than $125,000. |
|
Itemized Deductions |
The itemized deduction for state and local taxes (SALT) is capped at $10,000 |
Extend the current legislation due to expire in 2025 |
Cap itemized deductions at 28%. Restore the PEASE limitation for incomes above $400,000. End the SALT cap of $10,000 |
|
Student Loans |
Loan forgiveness is includable in income unless the student is permanently disabled or deceased. Also, certain exceptions for specific professions in underserved areas. |
Supports the passage of school choice legislation that would spend $5 billion a year on tax credits for donations to private school scholarships |
Student loans will be cancelled, tax-free, after borrowers have been enrolled in the income-based repayment plan for 20 years. |
|
Virtual Currency |
Treated as property for tax purposes and taxpayers are required to report on Form 1040 if they own virtual currency |
Has indicated “not a fan” of cryptocurrencies |
No specific plan announced |
|
Employee Qualified Retirement Plans |
Eligible employees can contribute a portion of their salary, tax deferred, into a qualified retirement plan. Minimum distributions required when the taxpayer turns 72 |
Would extend the provisions due to expire in 2025 |
Create “automatic 401(k)” for workers without access to a qualified plan. Allow 401(k) plans to offer hardship withdrawals for survivors of domestic violence or sexual assault penalty-free (still subject to ordinary income tax). Offer tax credits to small businesses to offset the cost of starting or maintaining a retirement plan. |
|
Premium Tax Credit |
Tax credits to lower income taxpayers to help pay premiums when purchasing health insurance through the Exchange. |
Would repeal the Affordable Care Act. |
Eliminate the 400% income cap on eligibility for the premium tax credit. Create a $5,000 tax credit for using informal caregivers, including family members. |
|
Corporate Tax Rate |
Currently 21% for all C Corporations |
No change |
28% tax rate with a minimum of 15% for companies reporting more than $100 million in the U.S. but paid no federal income taxes. |
|
Business Credit |
None |
None |
A 10% “Made in America” tax credit for companies that create jobs for American workers. It would also apply when a company is increasing wages above the pre-COVID baseline for jobs paying less than $100,000 |
|
Qualified Business Income Deduction (QBID) |
Taxpayers, other than corporations, may be eligible to deduct up to 20% of qualified business income from a partnership, S Corporation, or sole proprietor |
No change to current law |
End special qualifying rules, including those for real estate investors. Allow deduction for all taxpayers making $400,000 or less |
|
Estate Tax |
Exemption amount of $11.58 million in 2020. Assets transferred at death receive a step-up in basis to the fair market value on the date of death. The increased exemption amount reverts back to $5 million after 2025 |
The increased exemption amount would be extended beyond 2025 |
Eliminate the stepped-up in basis rule that allows people to pass capital gains onto their heirs with no tax after death. |
|
Tax Compliance |
Tax compliance is operated on a voluntary system requiring taxpayers to file annual tax returns. The tax gap, the difference between what is estimated to be owed and what the IRS collects, is approximately $440 billion per year |
The federal budget would ensure that taxpayers comply with their obligations and that tax refunds are only paid to those who are eligible. This includes improving the oversight of paid tax preparers, giving the IRS increased authority to correct errors on tax returns, requiring a social security number to claim certain credits, and increasing wage and information reporting |
No specific plan announced |
*Source - Maris & Associates, Helium Tax, National Society of Tax Professionals
