Taxes Set To Rise In 2026, No Matter What Happens With Build Back Better

Taxes Set To Rise In 2026, No Matter What Happens With Build Back Better Authored by Mike Shedlock via MishTalk.com, Many provisions of the 2017 Tax Cut and Jobs Act signed by Trump will expire. Let's look at the impacts... Tax Breaks Set to Expire Some provisions in the package of tax cuts which Trump signed in 2017 are now set to expire. The bill was known as the 2017 Tax Cut and Jobs Act. As a result, Taxes Will Rise Regardless of what happens with Biden's Build Back Better initiative. “Most of the individual provisions of the [law] do expire at the end of 2025,” said Garrett Watson, a senior policy analyst at the Tax Foundation. “Just like [many households] saw a tax cut in 2018, they might see a tax increase relative to current policy in 2026.” Rising Again * Prior to the 2017 tax law, the highest earners paid a 39.6% marginal income-tax rate. (Individuals paid the rate on income exceeding $426,700 and married couples on income over $480,050, according to the Tax Policy Center.) The law reduced the top rate to 37%. It will jump back to 39.6% in 2026. * Estates owe a 40% federal tax once values exceed a certain amount. The tax law roughly doubled the threshold, which was $5.49 million per person in 2017. (The amount, which changes each year to account for inflation, is $11.7 million a person and $23.4 million for married couples in 2021.) The threshold would fall to roughly $6 million in 2026 after accounting for inflation * The 2017 tax law allowed entrepreneurs who structure their business as a pass-through (such as a partnership or sole proprietorship) to deduct up to 20% of their business income from taxes. (Such entrepreneurs pay taxes on business income at their individual tax rates.) Business owners would lose the tax break in 2026.  Evaluation * Estate Tax: Estates with valuations over $6 million will see an additional tax of 40% of the difference between roughly $6 million and $12 million. * Top Brackets: Individuals making more than $426,700 and married couples on income over $480,050 will see their taxes rise by 2.6 percentage points in 2026. * Pass Through Income: The 2020 income limit for single filers is $213,300 and couples filing together can’t earn more than $426,600. The 20% tax break also expires at the end of 2025. Trump's Mistakes * Trump hugely front-loaded most of the package. By 2020, the economic boost was largely over.  * The bill certainly did not pay for itself as advertised. They never do, regardless of which party proposes them. * The real killer from a 2020 election point of view is that the cuts did very little for the middle class. This upset a lot of independents.   Biden Pledge Biden pledged not to raise taxes on those making less than $400,000.  That should mean he would not eliminate this tax break. Alternatively, he would set the limit at $400,000. Individuals Impacted By Expiring Benefits  In terms of the number of people affected, the pass through tax benefit likely hits the highest number of people. Hiking taxes on those making more than $426,700 per year likely impacts the least.  In terms of dollar amounts, estates with valuations between $6 million and $12 million would seemingly get clobbered.  For example, an estate worth $12 million would pay an extra tax of  $2.4 million (40% of $6 million).  In practice, however, people use tax shelters to avoid such events. *  *  * Like these reports? If so, please Subscribe to MishTalk Email Alerts. Tyler Durden Sun, 11/07/2021 - 17:00
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