hen President Donald Trump


oversaw the passing of the


Tax Cuts and Jobs Act (TCJA) in 2017,


Curtis D. Stoltzfus CAP®, CFP®


Senior Financial Strategist


substantive tax reforms were made with the intention of promoting economic growth that affected corporations, small businesses, and individuals. When I used to play


with Matchbox cars as a kid, I loved driving them around and imagining photo-finish race scenarios. With the legislature's balance of power remaining unchanged, we need to ask the same question now that I did then: who will be the winner of the contest?


Te cars we have (tax rules) might change, and we may need to reconstruct our financial parking lot. Joe Biden’s tax plan challenges several aspects of the current system in an effort to increase Federal tax revenues and address income/ wealth inequality.


in tax brackets under the proposed set rate (incentivizing taxpayers in lower tax brackets to contribute to tax-deferred retirement accounts), while increasing it for taxpayers in brackets over the proposed rate.


Enhancements to personal income tax credits made by the proposal include a higher Child Tax Credit (increased from $2,000 for children under 17 to $3,600 for children under 6 and $3,000 for all other children under 17), and a higher Child and Dependent Care Credit (from $3,000 to $8,000 for one child, and from $6,000 to $16,000 for two or more). Te first- time Homebuyer Credit would be reintroduced as a refundable and advanceable credit of up to $15,000, and a brand-new proposed Caregiver Credit would provide $5,000 for informal long-term caregivers.


One of the key features of Joe Biden’s proposed plan is for ordinary income brackets to be adjusted for individuals with annual incomes over $400,000 (although whether this threshold applies to individuals or joint filers remains unclear), and increasing the top tax bracket to the pre-TCJA rate of 39.6%. Te income brackets for those with annual income levels under $400,000 will remain unaffected.


With the election in November, the cars we have (tax rules) might change, and we may need to reconstruct our financial parking lot.


Long-term capital gains and qualified dividend tax rates would increase to ordinary income tax rates for income over $1 million under the proposed Biden plan (with the 3.8% surtax on net investment income to remain in place), and 1031 Exchanges (tax- free real estate swaps) would be eliminated for taxpayers with annual income over $400,000.


Additionally, Biden’s tax plan proposes to eliminate the step-up in basis rules that currently apply to inherited assets (that are not considered Income In Respect of a Decedent), which would impact both


higher and lower earners creating a potentially significant and problematic tax bill on inherited assets. A final change is a 50% reduction of the exclusion amount for estate and gift taxes, from $11.58 million to the pre-TCJA amount of $5.79 million.


Biden’s plan also includes the elimination of the Qualified Business Income (QBI) tax deduction for pass-through business owners (e.g., partnerships, LLCs, S corporations, and sole proprietors) whose individual annual income is $400,000 or more, in effect, potentially increasing the tax bracket for high earners by 10% (from 29.6% for those eligible for the QBI deduction to the proposed highest rate of 39.6%). Te plan would also cap the value of the rate at which itemized deductions can be taken to 28%, which affects those in the tax brackets above 28%. Te rate to determine itemized deductions for these folks would be reduced from their income tax bracket to 28%.


Another car in Biden’s tax plan fleet is a flat retirement contribution credit, as determined by a specific percentage (currently anticipated to be 26%) of the contribution amount. Tis would replace deductions of those retirement account contributions, and, in effect, lower the tax burden for taxpayers


ambassadoradvisors.com • 7


Rolling around Matchbox cars is a lot simpler than predicting the outcome of an administration's policy provisions. While tax laws may change, Ambassador Advisors will help position you and your trucks, sports cars, delivery vans, and sedans safely for what lies ahead.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16