TAX CHANGES ON THE HORIZON
When a new President takes office , there are always changes business owners need to pay attention to – especially when the new President is from a different political party than their predecessor . When President Biden took office in January , the change in power came with a whole slew of policy changes – many of which are tax changes .
Some of these changes have already been enacted , while others have been mentioned and could be on the horizon . This article will provide a brief overview of what tax changes we already know about and what tax changes could be coming to individuals and business owners soon .
Tax Changes We Know Of
• Employee Retention Tax Credit – This is a refundable and / or nonrefundable tax credit against certain employment taxes equal to 50 % of qualified wages . In order for employers to take advantage of this credit in 2021 , they must have either suspended business operations ( fully or partially ) due to a COVID-19 shutdown order or have a 20 % or greater decline in gross receipts compared to the same quarter of 2019 or the immediately preceding quarter . Eligibility requirements differ between 2020 and 2021 , and there are other items that must be considered when evaluating the applicability of this credit .
• The credit is worth :
• Up to $ 5,000 per employee per year in 2020 ( 50 % of wages up to $ 10,000 )
• Up to $ 7,000 per employee per quarter in 2021 ( 70 % of wages up to $ 10,000 )
• Solar Tax Credit – For individuals and business owners who are considering taking advantage of the federal solar tax credit , be prepared for those tax credits to decrease , beginning with the 2020 tax year . The phase down schedule is as follows :
• 26 % in 2020
• 22 % in 2021
• 10 % business , and 22 % residential in 2022
• Charitable Donations Deduction – For those of you who make charitable donations throughout the year , here are the following tax changes you can plan to experience :
• For individuals : a maximum deduction up to 100 % ( up from 60 %) of adjusted gross income . There is also a $ 300 above-the-line deduction for those who do not itemize .
• For corporations : the deduction for charitable donations was increased to 25 % ( up from 10 %) of taxable income .
Potential Tax Changes For Individuals
While we don ’ t have confirmation that the following tax changes will indeed take place , we ’ ve heard enough chatter in the industry to suspect that these individual tax changes are on the horizon .
• Individuals making more than $ 400,000 may see a tax rate increase to 39.6 % ( up from 37 %).
• For individuals making more than $ 400,000 , there may be a cap at 28 % on itemized deductions .
• There may be increased capital gains rates and qualified dividends rates for taxpayers making more than $ 1 million – possibly up to 39.6 %.
• There could be a phase out of the Qualified Business Income Deduction for taxpayers with taxable income over $ 400,000 .