Trump vs. Biden – How the Election Results May Impact Your Future Tax Liabilities

Oct 14, 2020

By Judy Mason, CPA, CVA – Partner
October 14, 2020

As the 2020 Presidential election approaches, it is important to know how the results of the election may impact you. Below is our comparison of how Trump and Biden are positioned on key tax law issues that may impact your future tax liabilities.

This chart represents the published tax plans presented by both candidates in a point-by-point comparison format. MichaelSilver does not express any opinion on the merit or viability of either candidate’s tax plan. Please note, history has shown time and time again, whatever tax plan is presented or enacted after the election will most likely vary greatly from the plans presented by the candidates during the campaign.

Individual Tax Rates
Current Law	Trump	Biden
Seven tax brackets applicable thru Dec. 31, 2025 Highest bracket 37%	10% middle class tax cut Extend current brackets past 2025 making them permanent	Increase top rate to 39.6% Taxpayers making more than $400,000 would see taxes increase
Capital Gains Tax and Investments
Current Law	Trump	Biden
Max. rate 20% Taxpayers in the 10% / 12% tax brackets pay 0% Taxpayers between 12% and top rate pay 15%	Seeking to cut capital gains tax rate to 15% and index to inflation	Over $1MIL income would tax capital gains at top 39.6% rate
NIT adds 3.8% for joint taxpayers earning over $250,000 and individuals earning over $200,000 Can defer gains by investing into a qualified opportunity zone	Otherwise would extend current rates past 2025	Incentivize Opportunity Funds to partner with community and non-for-profits Reviewed by Treasury department Require detail reporting and public disclosure
Transaction Tax
Current Law	Trump	Biden
There is no tax on entering into a financial transaction such as buying or selling stocks, bonds, derivatives.	No Plan	Supports
Itemized Deductions
Current Law	Trump	Biden
SALT deduction limited to $10,000	Extend current deductions and limits past 2025	Cap itemized deductions at 28% Restore 3% phaseout End SALT cap
Child Incentives
Current Law	Trump	Biden
$2,000 credit for qualifying child and $500 for other dependents Credit is phased out at higher income	Extend current credits past 2025 Require social security number for credits	Expand dependent care credit to $8,000 and $16,000 for two or more children Credit limited when family income exceeds $125,000
Employment / Social Security Taxes
Current Law	Trump	Biden
Payroll tax applied to wages up to $137,700 for 2020 FICA tax is 12.4% split between employer and employee	Issued executive order to allow deferral of 6.2% employee taxes from Sept. 1 thru Dec. 31, limited to those earning up to $104,000	Raise social security taxable wage cap for those earning more that $400,000 End employers classifying workers as independent contractors
Retirement Incentives
Current Law	Trump	Biden
Eligible employees can contribute to a qualified plan and defer taxable income until withdrawal. Not all employers offer retirement plans.	Extend current provisions past 2025	Create automatic 401(k) for workers without access to pension or 401(k) plans Offer tax credits to small businesses to offset cost to start and maintain plan
Health Care
Current Law	Trump	Biden
ACA tax credits for lower income taxpayers to help pay premiums when purchased insurance is purchased on the ACA exchange	Would repeal the ACA	Enhance ACA credits Create a $5,000 tax credit for use of informal caregivers Increase tax benefits for elderly taxpayers to purchase long-term care insurance Impose a tax penalty on drug manufacturers that increase costs over the general inflation rate
Corporate Tax Rate
Current Law	Trump	Biden
21%	No change	Increase rate to 28% 10% offshoring penalty surtax on profits from oversees production for sale in US 15% minimum tax on companies reporting more than $100MIL in US but paid zero Federal tax
Corporate Tax Credits and Incentives
Current Law	Trump	Biden
Nonrefundable tax credit for wages paid to new employees from qualified disadvantaged groups	No changes	Expand work opportunity tax credit to include military spouses Credit for new childcare construction to encourage businesses to build childcare facilities at workplaces Create a 10% “Made in America” tax credit
Depreciation
Current Law	Trump	Biden
Sec. 179 expensing deduction of $1,040,000 for 2020 100% bonus depreciation thru 2022, 80% 2023, 60% 2024, 40% 2025, 20% 2026	Extend expensing and deductions past 2025	Would reverse these provisions
Qualified Business Income Deduction
Current Law	Trump	Biden
Taxpayers with S Corp, partnership, and sole proprietorship are allowed a 20% deduction of qualified business income.	No plans to change current law	End special qualifying rules and allow deduction for taxpayers making $400,000 and under
Renewable Energy
Current Law	Trump	Biden
Taxpayers are allowed an investment tax credit for solar and wind renewable energy investments.	No specific plan	Restore electric vehicle tax credit Expand the tax deductions for energy retrofits investments in commercial buildings Reinstate the solar investment tax credit
Estate Taxes
Current Law	Trump	Biden
$11.58MIL lifetime exclusion for 2020 Assets passed at death have a basis step-up to FMV for the recipient Increased exemption reverts back to $5MIL after 2025	Extend current provisions	Eliminate the basis step-up for inherited assets

We will continue to keep you informed. If you have any questions, please contact your MichaelSilver tax professionals at 847.982.0333.