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

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.