Changes in government inevitably bring new priorities and policies, one being the area of taxes. Fiduciary Trust International Managing Director Craig Richards examines possible tax implications for individuals under President Joe Biden’s new administration.

With President Joe Biden now in office and a Democratic majority in Congress, we can be reasonably certain changes to tax policy are on the horizon—we just don’t know where and when. As a candidate, Biden outlined a number of potential tax changes on his radar, including tax increases for those in the highest income brackets—that is, the top 1% of income earners.

That said, the administration has a lot to deal with right now—namely coping with the pandemic. So, any changes in tax policy aren’t likely imminent. To put it into perspective, former President Donald Trump’s tax legislation took effectively 11 months—and that was without a crisis like COVID-19.

Changes at the Top

While Biden was very clear during his campaign that income tax rates would go up for the top tier, he didn’t disseminate a lot of detail, so we have to make some assumptions. On the individual side, currently (for the year 2020) the top tax rate is 37%, which was set by the Tax Cuts and Jobs Act (TCJA), signed in 2017 and enacted in 2018. Prior to the TCJA, the top rate was 39.6%.

We don’t know the exact cutoff in terms of income that would fall into the top tax rate, although he had targeted those making over $400,000 in various communications. For 2020, the top 37% tax rate applies to single individuals with taxable income of $518,400 and up, or $622,050 and up for married couples. We don’t yet know if those thresholds will remain, or would drop to $400,000, and for whom.