GettyPresident-elect Joseph Biden campaigned on a promise to raise taxes on wealthy Americans and corporations. His core tax proposals will increase taxes on people earning more than $400,000 per year and raise corporations’ tax rates from 21% to 28%.
And although his tax plan will impact the bottom line of the wealthiest of Americans, low- and middle-income households may benefit from increased tax credits.
To get an understanding of how Biden’s tax plan could impact your taxes, use the calculator below to determine how much you might pay under the president-elect’s tax plan.
Find out if your taxes will go up or down under Biden's plan
Under Biden's proposed tax plan you'll pay $5,600 more than the current federal tax plan under Trump
Comparing both tax results
Est. Federal Taxes
Est. Federal Refund
Trump
$26,210
Biden
$26,210
Disclaimer: This tool is for educational purposes only and should not be used for tax preparation purposes. Your actual tax payment or refund may vary depending on several factors. This tax calculation omits certain deductions and credits for simplicity. We suggest seeking a tax professional's advice to determine how any tax code changes would impact your financial situation.
Individuals earning more than $400,000 per year will see a significant change under Biden’s tax plan. According to the Tax Policy Center, if you earn $790,000 or more, you can expect to pay an average of 16% of after-tax income. Also, the top-tier tax bracket rate will increase from 37% to 39.6%.
If you earn more than $1,000,000, you’ll see an increase in the long-term capital gains tax rate, which is a special tax assessed on assets held longer than a year. Lastly, Biden proposes a 28% tax cap on itemized deductions, and the elimination of the qualified business income tax deduction for those earning more than $400,000.
Biden doesn’t plan to raise taxes on low- to middle-income taxpayers. However, this group can expect to see changes to certain tax credits, which means they may end up with more money back in their pockets. These tax credits include the child tax credit, child and dependent care credit, and earned income tax credit. Biden also plans to implement a retirement tax credit for those saving to a 401(k) plan, a renter’s tax credit, and reinstate the homebuyer tax credit.
While this calculator assumes that Biden’s tax policies shall occur in the taxable year 2020, it’s unlikely that this will happen—and the jury is out on whether a new tax law will be passed in time for the taxable year 2021. The fate of Biden’s tax proposal will rest on whether he can pass a new tax law through Congress. President Donald Trump ran on a platform that included sweeping tax cuts, but he was in office for nearly a year before his signature tax law, the Tax Cuts And Jobs Act (TCJA) passed.
There are no tax rate changes in 2020.
If Biden’s tax policy passes, it won’t make many changes to the brackets that exist under the TCJA but would replace the top tax bracket, changing the rate from 37% to 39.6% for those earning more than $400,000 per year.
Under the current law, a taxpayer can claim the child tax credit of up to $2,000 for qualified children under 17. This credit is a refundable credit up to $1,400, which means if the credit is more than the amount of taxes owed, the taxpayer can expect money back. This credit phases out for anyone earning $200,000 or above ($400,000 for married couples filing jointly).
Biden’s tax proposal seeks to increase the child tax credit for qualifying children from $2,000 to $3,000. Those who have children under the age of 6 would receive an additional $600. Biden also proposes to make the credit fully refundable without any phaseouts.
Under the current law, a taxpayer can claim the child and dependent care credit for qualified expenses for dependent care. Taxpayers may deduct $3,000 ($6,000 for two or more dependents) of the costs paid for dependent care on their federal income tax return.
The dependent must be under the age of 13, a spouse or another qualifying individual who cannot care for themselves. The allowable tax credit will depend on the taxpayer’s income.
Biden tax proposal seeks to increase the child and dependent care credit qualifying expenses from $3,000 to $8,000 ($16,000 for two or more dependents).
This calculator’s primary purpose is to compare Biden’s key tax proposals with the current tax law to show expected tax changes. It does not compare other income, deductions, or credits that are expected to remain unchanged even if Biden passes a new tax law. This calculator and its inputs are based on information from the current tax law (the 2017 Tax Cuts and Job Acts), the 2020 projected tax brackets, and core key policies proposed by Biden as follows:
