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Alert: The Train is Leaving the Station

By: William L. Bricker and Juliya L. Ismailov

President Biden, true to his campaign platform, is planning the first major federal tax overhaul since 1993 to fund the next stimulus package.

In addition to the possibilities for business tax planning, we direct your attention to the last 3 items on the following list of the Biden tax proposals. The multi-faceted increases in estate taxes can be ameliorated by making gifts before the proposed changes take effect.

Time is running out before the limited window of opportunity for planning closes and “the train finally leaves the station.”

Biden tax proposals:

  • For C corporations: raising tax rate to 28% from 21%

  • For individuals earning over $400,000:

    • Raising top income tax rate from 37% to 39.6%

    • Capping itemized deductions at 28% of adjusted gross income

    • Taxing capital gains as ordinary income for those earning more than $1 million

    • Eliminating the 20% deduction for pass-through income

  • Estate tax:

    • Lowering the lifetime exemption from the current $11.7 million (scheduled to revert to $5.5M in 2026) down to $3.5M

    • Raising top tax rate from 40% to 45%

    • Eliminating step-up in basis at death (imposing income tax on unrealized gain at 39.6% top rate, in addition to 45% estate tax on value of asset) resulting in an aggregate total tax as high as 70%


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