by Maria Szobi

After an emotional rollercoaster of election ballots counts, recounts, crazy talk and several legal shenanigans, it’s time to get back to the sound financial planning in the aftermath of the election.

Given the upcoming change at the top let’s revisit some key takeaways from the Biden’s tax plan.

1.       Biden’s plan considers high-earners people who earn more than $400,000 in taxable income. For these individuals or households, the highest tax income tax bracket would go up again from 37% to 39.6 %.

2.       Social Security Tax of 12.4% would apply to employment and self-employment earnings after you reach $400,000 of income. This will create a so-called “doughnut hole” of employment income between the amount of $400,000 and $142,800. This means no social security withholding after the regular cap of $142,800 is reached. However, once you reach $400,000 you become subject to the social security tax again.

3.       Increase of corporate tax rate from 21% to 28%.

4.       Re-established and expand the First Time Homebuyer Tax Credit.

5.       Increase Child and Dependent Care Credit. The maximum value of credit would increase from $2,000 to $3,600.

6.       For individual with more than $1 million of income, long term gains and many dividends are proposed to be taxed at ordinary rate (the highest marginal rate).

These proposals are all still very fluid so nobody should start making big life decisions based solely on them.

The main point is this, the top individual income tax bracket has never been this low since the Great Depression. Therefore, we understandably expect the tax rates to go up rather than down.

The question remains who gets to control the Senate, which in turn will determine how much support the president gets for these changes.

This will be decided in January. Until then, keep an eye out for my next article about year end tax planning ideas that you can implement right now….