Special Report: What the Biden Tax Plan Means for You

Posted on by

[Editor’s note: It’s hard to know what to believe in today’s environment. From cable news networks, to talk radio show to internet news sites – where do you get the facts? Folder tabs with various tax type names

That’s why we did the research. And that’s why we are delivering tax facts in this special report – about what President Biden’s proposed tax changes could mean for you. Using sources like the Internal Revenue Service and the Tax Foundation, the nation’s leading independent tax policy nonprofit, we drilled down on key proposals and outline here how they could impact your taxes, deductions and implications for passing wealth from one generation to the next.

These are just proposals and official legislation has not yet been submitted to Congress. Yet, we wanted to provide you with the information you need now – so you can prepare your finances ahead of potential tax law changes.

If these proposals become law it is valuable to understand how it will affect you and why it may be important to increase your allocation to gold now before the tax plan passes.]

Democrats Control the White House and Congress

What could Democratic control mean for your taxes? If you are nervous, you aren’t alone.

There’s good reason for concern. In general, President Biden’s tax proposals will raise taxes on high-income earners, remove long-standing deductions and tax a larger percentage of generational wealth transfer.

If all these tax proposals become law, it would raise $3.3 trillion over the next decade, according to the Tax Foundation.

How much of that will come from you?

Here’s what we found.

It’s True, High Earners Will Pay More Income Tax

Are you married, filing jointly with income over $400,000? It’s time to prepare and reposition your finances now. The Biden proposal is coming for you. Your tax bracket jumps from 32% to 39.6% under the proposed increase.

Key changes that lie ahead if tax proposals are passed:

 

  Current Law Biden Proposal
Income Tax Rates 37% Top marginal tax rate Increase top tax rate to 39.6%. This move would return the top tax rate to the level seen before the 2017 Tax Cuts and Jobs Act. 
Long Term Capital Gains Hold assets over a year: 20% For taxpayers with income above $1 million – increase to 39.6%
Itemized deductions Various

Limit deductions for taxpayers earning over $400,000 to 28% AGI
Retirement Plan deductions They are deductible with limits. Eliminate deductions. Replace with a 26% flat tax credit.
Payroll Tax (that funds the Social Security Trust Fund)
 6.2% payroll tax on income up to $137,700. Then $0.

Adds Payroll tax on people with income over $400,000 (wages between $137,700 and $400,000

will not be taxed). This creates the so-called “donut hole” of income that is not taxed.

 

It’s True, Wealthy Heirs Will Pay More in Taxes

There are many proposed changes for the estate tax.

Biden’s plan attacks and increases the estate tax in two ways.

  • It increases the estate tax rate from 40% to 45%.
  • It lowers the size of the estate that can be taxed from $11.7 million to $3.5 million.

Let’s walk through this a bit more – if this applies to you – this is a significant change.

The current estate tax level is 40%. Biden’s proposal will raise the estate tax to 45%.

The Biden tax proposal includes a lowering of the estate tax exclusion level.

Current Law

  • If you currently leave $11.7 million or less to an heir – it is not subject to the estate tax.
  • If you bequeath over $11.7 million – it would be taxed at 40% under current law.

Under the Biden tax proposal – this exclusion amount will revert back to pre-2017 Tax Cut and Jobs Act levels to $3.5 million.

  • This means: if you leave an estate worth over $3.5 million to your heirs – it would be taxed at a new higher 45% estate tax rate – if this proposal becomes law.

Many families will be affected by the proposed change to the estate tax.

It’s time to take action now to preserve and protect your wealth.

We can help you with that. There are more details below on what you can do now if this could affect your family.

Basis Step-Up at Death.  Currently – heirs pay NO capital gains tax. Under the Biden tax proposal – this is eliminated. Heirs would pay the capital gains tax. (A step-up in basis is the readjustment of the value of an appreciated asset for tax purposes upon inheritance, according to Investopedia).

How Gold Can Protect Your Wealth

Are you concerned?

Now is the time to take action and re-position some holdings to get in front of these proposed tax changes.

Gold bullion and rare coins have long been touted by trust attorneys as an efficient and discreet method of transferring wealth from one generation to another.

With the proposed estate tax level falling from $11.7 million to $3.5 million – that means many more families will be forced to pay the 45% tax rate. That significantly reduces the wealth you can give to your heirs – as the government will take a much larger portion of your family’s money.

Gold is an excellent vehicle for the private preservation of wealth.

If you or your family could be impacted by the proposed shift in the estate tax law, don’t wait. Contact a Blanchard portfolio manager for a confidential portfolio review – and to learn strategies to maximize your wealth transfer.

Coming next: Part two of this Tax series will discuss the elimination of key deductions you may rely on now.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.