While the coronavirus pandemic may have moved the upcoming presidential election off the front burner for much of the spring and summer, it’s bound to move back as the fall approaches.
With that in mind, public accounting firm Crowe has released this handy at-a-glance summary of the two candidates’ proposed policies for taxes on individuals.
Individual tax rate
Current law: The top marginal tax rate is 37% for income over $518,400 for individuals and $622,050 for married couples filing jointly.
Rates are scheduled to increase to the pre-Tax Cuts and Jobs Act of 2017 (TCJA) amounts after 2025.
Donald Trump: Enact a 10% middle-class tax cut, which reportedly could include lowering the 22% marginal tax rate to 15%. For 2020, the 22% marginal tax rate applies to income over $40,125 for individuals and $80,250 for married couples filing jointly.
Extend the individual rates enacted by the TCJA that are scheduled to expire after 2025.
Joe Biden: Raise the top marginal tax rate to the pre-TCJA rate of 39.6% for income over $400,000.
Current law: The top tax rate for capital gains and qualified dividends is 20% for income over $441,450 for individuals and $496,600 for married couples filing jointly. In addition, there is a 3.8% net investment income tax.
Donald Trump: Index capital gains for inflation.
Reduce the capital gains tax rate.
Enact a capital gains tax holiday that eliminates capital gains taxes for a yet-to-be-identified period.
Joe Biden: Remove the preference for capital gains and qualified dividends for income over $1 million by taxing them at ordinary rates.
The net investment income tax remains.
Current law: The basic standard deduction for married couples filing jointly is $24,800 ($12,400 for single taxpayers or for married taxpayers filing separately, and $18,650 for heads of household). After 2025, the basic standard deduction is scheduled to revert to pre-TCJA amounts.
The TCJA suspended the personal exemption and most individual deductions through 2025.
Donald Trump: Extend the higher basic standard deduction and other deductions enacted by the TCJA that are scheduled to expire after 2025.
Joe Biden: Limit total itemized deductions so the reduction in tax liability per dollar of deduction does not exceed 28%, which means taxpayers in tax brackets higher than 28% will face limited itemized deductions.
Phase-out the 20% pass-through deduction for income over $400,000.
Current law: A child with an individual taxpayer identification number cannot be claimed for the Child Tax Credit but can be claimed for the $500 other dependent credit. A taxpayer with an individual taxpayer identification number is eligible to claim the Child Tax Credit and the $500 other dependent credit.
The maximum CTC is $2,000. This amount is scheduled to revert to the pre-TCJA amount of $1,000 after 2025.
The maximum child-and-dependent-care credit is $1,200.
Workers older than 65 who do not have a qualifying child are not eligible for the Earned Income Tax Credit.
There is no tax credit for first-time homebuyers.
There’s also no tax credit for renters.
Donald Trump: Require a dependent to have a Social Security number to be eligible to be claimed for the $500 other dependent credit. Require a taxpayer to have a Social Security number to claim both the CTC and the $500 other child dependent credit.
Extend the $2,000 CTC enacted by the TCJA that is scheduled to expire after 2025.
Joe Biden: Raise the CTC to $8,000 for one child and $16,000 for two or more children for taxpayers with income up to $125,000 per year. The credit phases out for income between $125,000 and $400,000 per year.
Expand the EITC to workers older than 65 who do not have a qualifying child.
Enact a $5,000 tax credit for family caregivers of people who have certain physical and cognitive needs.
Enact a refundable, advanceable tax credit of up to $15,000 for first-time homebuyers.
Enact a renter’s tax credit, designed to reduce rent and utilities to 30% of income for low-income individuals and families who make too much money to qualify for a Section 8 voucher.
Current law: There’s no tax credit for contributions to state-identified not-for-profit scholarship-granting organizations, though some amount might be deductible as a charitable contribution.
Forgiven student loan debt generally is included in taxable income.
Donald Trump: Enact the Education Freedom Scholarship tax credit, which would provide up to $5 billion worth of income tax credits annually for individual and corporate donations to state-identified not-for-profit scholarship-granting organizations.
Joe Biden: Exclude forgiven student loan debt from taxable income.
Estate and gift tax
Current law: For 2020, the estate and gift tax exemption is $11,580,000. This amount is scheduled to revert to the pre-TCJA indexed amount of approximately $5.8 million after 2025.
Transfers of appreciated property at death get a stepped-up basis.
Donald Trump: Extend the higher estate and gift tax exemption enacted by the TCJA that is scheduled to expire after 2025.
Joe Biden: Eliminate stepped-up basis on transfers of appreciated property at death.
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