President Joe Biden made it very clear that he had plans to make drastic tax laws during the election campaign. Biden has since released his stimulus plan, where he has clearly defined several tax changes already. From its sounds, this administration plans to focus on tax laws that will help revive the struggling economy following the COVID 19 pandemic.
From campaign to the presidency, there has been a lot of talk about tax proposals, but what are the actual plans? Let’s take a closer look at the new Biden tax laws 2021 has in store.
Individual Income Tax Rate Increase
During the Trump administration, the highest federal income tax rate was 37%. Before this time, the tax rate had been 39.6%. In the new Biden tax laws of 2021, the higher rate of 39.6% would return for individual federal income tax rates.
Corporate Tax Rate Increase
In addition to raising the individual income tax rate, the Biden administration plans to increase the corporate tax rate from 21% to 28%.
Alternatively, corporations with an income of $100 million or more in a year will have the alternative 15% minimum tax instead. This alternative minimum tax (AMT) prevents companies from paying zero taxes, as they have in the past. Between the two, the 28% or AMT, corporations will be responsible for paying the greater of the two.
Global Intangible Low-Taxed Income (GILTI) Increase
The new Biden tax laws will also penalize the exportation of jobs overseas. Additionally, it will promote and provide incentives to businesses focused on manufacturing, transportation, and green energy.
The Global Intangible Low-Taxed Income (GILTI) would increase to 21%, up from 10.5%. There also are a wide variety of tax credits available to businesses forced with workforce layoff and other small businesses.
Additional Payroll Taxes
There will be additional payroll taxes for any individuals who earn more than $400,000 in a year. There will now be a cap on the tax benefit afforded itemized deductions at 28%. In the past, these deductions were based on a percentage tax rate that was applied to these higher tax brackets.
Anyone whose income is over $1 million in a year will pay the same rate on investment income as they do for wages.
The carried interest “loophole” that hedge-fund and private-equity managers have claimed in the past will also be eliminated. In this “loophole,” capital gains tax rates max out at 20% rather than at rates matching their income.
Child and Dependent Tax Credit Increase
During the Trump administration, the maximum Child and Dependent Tax Credit was $3,000. In the Biden tax laws of 2021, this maximum will increase to $8,000 per dependent. The total credit will be up to $16,000 for individuals with multiple dependents.
First-Time Homebuyers Credit
The First-Time Homebuyers Credit has since been eliminated but will be restored in the new Biden tax laws of 2021. This tax credit was initiated as a direct result of the Great Recession and will return with a maximum of $15,000.
How Primary Payroll Services Can Help
With all of the changes to tax laws on the horizon under the Biden administration, it can be challenging to stay on top of all of them at once. At Primary Payroll Services, our trained professionals are always up-to-date on changes regarding payroll taxes, alleviating that burden from you.
Primary Payroll services is a smaller company, which means we have the luxury of dedicating ourselves wholly to our clientele rather than getting lost in the shuffle with the larger corporations. At Primary Payroll services, you will always receive our highest levels of customer service.
Let our payroll experts at Primary Payroll Services assist you with selecting the right payroll services for your business needs. Call us at 562-595-0066 or request a free quote online.