Joe Biden was sworn in as our 46th President. He has a number of important items to tackle such as the coronavirus response, economy, immigration, climate, healthcare, and many more. With any new President comes new policies that will affect your investments and your financial future. What’s in store for us?
Biden has already shared his tax plan and here are some of the proposals as cited at Forbes.
- Tax brackets for high income earners: Biden proposes to increase the top individual income tax bracket for Americans earning more than $400,000. The tax rate will increase from 37% to 39.6%.
- Capital gains tax: His plan would implement a tax rate of 39.6% on income above $1 million for long-term capital gains and qualified dividends.
- Itemized deductions for high income earners: Biden proposes to limit itemized deductions, which include state and local taxes, medical expenses, mortgage interest and other deductions, to 28% for high-income taxpayers. Generally, if a high-income taxpayer is subject to a marginal tax rate of 32%, they can reduce their tax liability at the same rate (32%). However, this proposal would mean you could only reduce up to 28%, despite your higher tax rate.
- Increase corporate tax rates: Biden proposes raising the corporate tax rate from 21% to 28%. In 2017, the corporate tax rate decreased from 35% to 21% under the Tax Cuts and Jobs Act, a hefty dip that helped lead to an increase in the national deficit and triggered record stock buybacks at U.S. corporations.
- Corporation minimum tax: Biden also proposes a minimum tax of 15% on corporations that earn $100 million or more in on-book income, which is the amount reported on the company’s financial statements. This could have major implications for large corporations that historically have been able to deduct billions in profits from their taxes, regardless of on-book income.
To see more details of his plan, click here.
We don’t know how the future will play out. We don’t know what policies will be passed. We don’t know how much you’ll be impacted. We do, however, have a glimpse as to what Biden is planning and this is a start for all of use to start preparing for, whether it benefits or does not benefit you.
One of Trump’s tax law changes was that he raised the standard deduction which impacted many Americans, including myself, and you heard stories of families going from expecting a tax return to breaking even or owing the government.
What other pieces of information has Biden hinted that could impact your investments? I’ve been following Biden and his push for clean energy to help climate change. As I wrote in my 2021 investment focus article, my focus this year is to invest in Tesla. They had a huge year in 2020 and with the push for climate change and more manufacturers are coming out with electric vehicles (EV), I believe Tesla will continue to be a force in 2021 and on.
As technology continues to adapt to recent events, I believe technology will continue to be a focus with remote workers, online classes, and a continued surge in online shopping. Healthcare will be a sector to monitor for especially with vaccine manufacturers and healthcare providers.
The stock market on Inauguration Day moved upwards which can give you a glimpse as to what to expect from a Biden Presidency. Not every sector is going to benefit from Biden’s policies. To keep your investments and your financial future from being impacted, do your research, determine if there are impacts to you, and make adjustments if necessary. If you are interested in following my journey, email subscribe to get alerts of latest posts and follow me on Facebook.