Calling all startups and startup founders: now that the election is almost finalized, the time to start tax planning is now. Although many specifics are not yet fully developed, here is what we know right now about how a President Biden plans to change your taxes:
Joe Biden plans to increase the corporate tax rate from 21% to 28%.
Per Biden’s campaign website, he will double “the rate of the Trump offshoring tax rate and it will apply to all income.” This would increase the Global Intangible Low-Tax Income (GILTI) tax rate on foreign subsidiary income from 10.5% to 21%.
Biden will seek to implement a 10% “Made in America” tax credit for certain costs of businesses that invest in “revitalizing closed or nearly closed facilities, retooling or expanding facilities, and bringing production or service jobs back to the U.S. and creating U.S. jobs.”
A startup that moves jobs overseas that could have been offered to Americans will be denied certain tax benefits and will need to return any public investments previously received.
IRC Section 199A currently provides a 20% deduction that reduces LLCs’, contractors’ and consultants’ taxable income. Biden plans to eliminate this deduction. However, you may still qualify if your taxable income is less than $400,000.
When you sell your startup and your gain exceeds $1M+, your long-term capital gains tax rate will increase from 20% to 39.6%.
When you die, your estate tax rate will increase from 40% for estates over $11.6M to 45% for estates over $3.5M. Therefore, an estate of $10M will now pay estate taxes of about $3M instead of $0. This change will make estate planning more important than ever.
As of right now, Biden has not indicated whether he will change the R&D Credit. However, with the amount of changes on the table, there is no telling what could happen next year.
In tax year 2019 alone, Accountalent helped 250+ clients claim over $10 million in PATH Act R&D Credits. Don’t leave cash on the table. Contact us now for a free consultation before these changes take place.
Header photo courtesy JoeBiden.com.
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