Is Your Financial Plan Ready for a Biden Presidency?

Though the 2020 election is still months away, and though anything can happen between now and then (and probably will!), it’s not too early to start thinking about the possible changes to tax and other finance-related laws that could occur under a Democratic administration. A recent article from points out several potential features of former Vice President Biden’s plan, if he were to be elected in November. Let’s take a look at a few features of that plan and how they might impact your taxes, your financial plan, and even your business, especially if you are a small business owner.

First, it seems possible that a Biden presidency could result in higher individual tax rates, including both income and payroll taxes, on those earning more than $400,000 per year. For example, an increase in the top personal rate from the current 37% to 39.6% would be likely. Several benefits created for higher-income earners under the Tax Cuts and Jobs Act of 2019 (TCJA), set to expire in 2025, would likely be repealed sooner, and a Social Security (OASDI) payroll tax of 12.4% for those earning in excess of $400,000 annually could be imposed.

Additionally, the corporate tax rate could be increased from 21% to 28%, and a minimum tax rate for corporations seems likely.

Turning to estate planning considerations, a Biden administration is likely to look at lowering the exemption for estate tax, currently at $11.6 million per individual ($23.2 million for a married couple). Some Democrat lawmakers favor a ceiling of $3.5 million. It is also possible that the rate of taxation could be raised. The current rate for estates above the exemption amount is 40%, but some Democratic proposals would raise the rate to as much as 77%.

What does all this mean to you right now? Well, if you are a small business owner and you want to hedge your bets, you may wish to pull as much earned and capital gains income as possible into 2020 in order to take advantage of the current, more favorable taxation policies. If Biden wins the election, it may be to your advantage to maintain a salary below $400,000 and structure other cash flow as dividends, rents, or other forms of unearned income.

If you have an estate valued above $3–5 million, it may be time to begin reviewing your planning documents, your gifting strategy, and other tools at your disposal to reposition assets in light of a lower exemption ceiling.

No matter your political leanings or who ultimately wins in November, planning ahead is always wise. I specialize in helping clients stay current on smart investing and financial planning strategies. If you have questions about your estate plan, your retirement accounts, or how your investments and other income may impact your tax situation, please get in touch with me. To read my recent blog article, “Estate Planning during the Coronavirus Pandemic, click here.

I offer sound, research-based advice that will help you plan smarter, whatever happens in November. Whether the occupant of the White House favors red or blue, I am here for you.

Stay Diversified, Stay YOUR Course!