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Current Tax Law
(TCJA–present) |
Biden’s stated goals |
Trump’s stated goals |
Corporate tax rates and AMT |
Corporations have a flat 21% tax rate and no corporate alternative minimum tax (AMT), which were both changed by the TCJA.
These do not expire.
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Biden would raise the flat rate to 28%, below the pre-TCJA level of 35% and reinstate the corporate AMT, requiring corporations to pay the greater of their regular corporate income tax or the 15% minimum tax (while still allowing for net operating loss (NOL) and foreign tax credits). |
Trump has proposed lowering the corporate tax rate to 20%.
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Capital gains and Qualified Dividend Income |
The top tax rate is 20% for income over $441,450 for individuals and $496,600 for married filing jointly. There is an additional 3.8% net investment income tax. |
Biden would eliminate breaks for long-term capital gains and dividends for income above $1 million. Instead, these would be taxed at ordinary rates. |
Trump would reduce the long-term capital gains tax rate to 15% from 20%, index capital gains for inflation and create a capital gains tax holiday that would eliminate capital gains taxes for a period of time TBD. |
Payroll taxes |
The 12.4% payroll tax is divided evenly between employers and employees and applies to the first $137,700 of an individual’s income (scheduled to go up to $142,400 in 2020). There is also a 2.9% Medicare Tax which is split equally between the employer and the employee with no income limit. |
Biden would maintain the 12.4% tax split between employers and employees and keep the $142,400 cap, but would institute the tax on earned income above $400,000. The gap between the two wage levels would gradually close with annual inflationary increases. |
Trump issued an executive order to temporarily postpone social security tax for employees from Sept. 1 through Dec. 31, 2020.
He has indicated he would make this temporary reprieve permanent. |
International taxes (GILTI, offshoring) |
GILTI (global intangible low-tax income): Established by the TCJA, U.S. multinationals are required to pay a foreign tax rate of between 10.5% and 13.125%.
A scheduled increase in the effective rate to 16.406% is scheduled to begin in 2026.
Offshoring taxes: The TCJA includes a tax deduction for corporations that manufacture in the U.S. and sell overseas. |
GILTI: Biden would double the tax rate to 21% and assess a minimum tax on a country-by-country basis.
Offshoring taxes: Biden would establish a 10% penalty surtax on profits for goods and services manufactured offshore and a 10% advanceable “Made in America” tax credit to create U.S. manufacturing jobs. Biden would also close offshoring tax loopholes in the TCJA. |
Trump has proposed but not provided details for a “Made in America” tax credit as well as tax credits for onshoring jobs. |
Estate taxes |
The estate tax exemption for 2020 is $11,580,000. Transfers of appreciated property at death get a step-up in basis.
The exemption is scheduled to revert to pre-TCJA levels. |
Biden would return the estate tax to 2009 levels, eliminate the current step-up in basis on inherited assets, and eliminate the step-up at death provision for inherited property passed along by the decedent. |
Trump would push to extend the exemption and would not change the transfer of appreciated property step-up in basis. |
Individual tax rates |
The top marginal rate is 37% for income over $518,400 for individuals and $622,050 for married filing jointly. This was lowered from 39.6% pre-TCJA. |
Biden would restore the 39.6% rate for taxable income above $400,000. This represents only the top rate. |
Trump would keep the current status quo of 37%. In addition, he would enact a 10% rate cut for middle-class taxpayers, which would lower the 22% rate to 15%.
For 2020, the 22% rate applies to income over $40,125 for individuals and $80,250 for married filing jointly. |
Individual tax credits |
Currently, individuals can claim a maximum of $2,000 Child Tax Credit (CTC)plus a $500 dependent credit.
Individuals may claim a maximum dependent care credit of $600 ($1,200 for two or more children).
The CTC is scheduled to revert to pre-TCJA levels ($1,000) after 2025. |
Biden would expand the CTC to $3,000 for children age 17 and under and offer a $600 bonus for children age 6 and under. It would also be fully refundable.
He has also proposed increasing the child and dependent care tax credit to $8,000 ($16,000 for two or more children), and he has proposed a new tax credit of up to $5,000 for informal caregivers.
Separately, Biden has also proposed a $15,000 tax credit for first-time homebuyers. |
Trump would extend the $2,000 CTC past 2025; however, he would also require social security numbers to be eligible to take any of these credits.
Trump has not commented on a tax credit for first-time homebuyers. |
Qualified Business Income Deduction under Section 199A |
As previously discussed, many businesses qualify for a 20% qualified business income tax deduction lowering the effective rate of tax for S corporation shareholders and partners in partnerships to 29.6% for qualifying businesses. |
Biden would phase out the tax benefits associated with the qualified business income deduction for those making more than $400,000 annually. |
Trump has not suggested any changes to the current rules. |
Education |
Forgiven student loan debt is included in taxable income.
There is no tax credit for contributions to state-authorized organizations that sponsor scholarships. |
Biden would exclude forgiven student loan debt from taxable income.
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Trump would provide a tax credit for individual and corporate donations to state-authorized organizations that sponsor scholarships. |
Small businesses |
There are current tax credits for some of the costs to start a retirement plan. |
Biden would offer tax credits for businesses that adopt a retirement savings plan and offer most workers without a pension or 401(k) access to an “automatic 401(k)” |
Trump has not proposed a retirement savings plan tax credit. |
Itemized deductions |
For 2020, the standard deduction is $12,400 for single/married filing separately and $24,800 for married filing jointly.
After 2025, the standard deduction is scheduled to revert to pre-TCJA amounts, or $6,350 for single /married filing separately and $12,700 for married filing jointly.
The TCJA suspended the personal exemption and most individual deductions through 2025.
It also capped the SALT deduction at $10,000, which will remain in place until 2025, unless repealed. |
Biden would enact a provision that would cap the tax benefit of itemized deductions at 28%.
SALT cap: Senate minority leader Charles Schumer has pledged to repeal the cap should Biden win in November (the House of Representatives has already passed legislation to repeal to the SALT cap). |
Trump would extend the TCJA standard deductions beyond 2025 and make them permanent.
While Trump in 2019 said he might consider changing the SALT cap, it has not been a subject of recent focus.
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Opportunity Zones |
See BDO’s Opportunity Zones landing page for insights |
Biden has proposed incentivizing - opportunity zone funds to partner with community organizations and have the Treasury Department review the program’s regulations of the tax incentives. He would also increase reporting and public disclosure requirements. |
Trump has said he will expand opportunity zones (unspecified). |
Alternative energy |
Visit our Alternative Energy landing page for insights |
Biden would expand renewable energy tax credits and credits for residential energy efficiency, and restore the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit. |
Trump would accelerate depreciation for renewable energy property as well as offer various investment tax credits (unspecified). |