Joe Biden’s 2025 Tax Proposal EXPLAINED

Joe Biden’s 2025 Tax Proposal EXPLAINED

President Biden recently released his 2025 proposal on taxes and he wants to make some sweeping changes on your individual taxes on your investment tax income and on corporate and business taxes what are those changes well for individuals number one he wants to go after people who didn’t pay taxes number two he wants to raise the top tax rate from 37% to 39% number three he wants to raise Medicare taxes number four he wants to increase a child care tax credit number five he wants to increase the earned income tax credit for investors what does he want to do number one he wants to get rid of crypto subsidies number two for Real Estate Investors he wants to eliminate the like kind 1031 exchange number three he wants to increase the capital gains tax rate that you pay if you’re wealthy number four is he wants to remove the whole idea of stepped up basis for corporations and businesses what does he want to do number one he wants to raise the corporate tax RP from 21% to 28% number two he wants to deny deductions of all employees in corporations making over a million a year number three is he wants to quadruple 4X the tax on stock BuyBacks number four is he want to eliminate the subsidies for oil and gas and number five is he wants to eliminate the corporate jet deductions everything that I’m going to be going over in this video is from the White House fact sheet it is titled the president’s budget cuts taxes for working families and makes big corporations and the wealthy pay their fair share if you want to read it for yourself I got the link for you down in the description but what I want to do in this video is I want to go over the different changes that President Biden is proposing I’m going to start by going over the individual tax changes then the investor tax changes followed by the business and corporate tax changes so let’s start by jumping in to the individual tax change proposals that President Biden is making the first thing here is that President Biden wants the IRS to go after people especially wealthy people who have not paid their taxes President Biden has already secured additional funding for the IRS that is enabling it to crack down on the high inome individuals and corporations who too often avoided paying their lawfully owed taxes and this is why the IRS is working to hire thousands of more agents so they can go after people who haven’t paid the taxes the second thing that President Biden wants to do is he wants to raise the top income tax rate from 37% to 39.6% but to understand what that means you have to understand that we have a marginal tax bracket system and what that means is for every dollar that you earn from 0 to $1.6 th000 as a single person or 0 to $23,200 I know I rounded these numbers as a married couple you will pay 10% of your income in taxes between 11.6 th000 to 471000 as a single you’re going to be paying 12% of your income in taxes from $ 47,1 to $100,500 you’re going to pay 22% of your income in taxes from $100,500 to $191,900 you’re going to pay 24% of your income in taxes from $191,900 to $243,700 you’re going to pay 32% of your income in taxes and then from $243,700 to $69,500 you’re going to pay 35% of your income in taxes and then everything over $69,500 as a single you’re going to be paying 37% of your income in taxes if you’re married well then you look at these numbers in parentheses right here that means if you make $50,000 a year in taxes the way that you pay taxes is not by saying okay I’m making $50,000 so all of my income is taxed at 22% no that’s not how it works if you make $50,000 a year and you’re single what that mean means is for the first $11,600 that you earn you pay 10% of income in taxes between $1,600 to $47,700 you’re paying 12% of your income in taxes and then for every dollar between $7,100 and $50,000 which is $2,900 that’s the only money that you’re going to pay 22% of your income in taxes that’s how the marginal tax bracket system works so what President Biden is now proposing is number one he wants to change the top tax rate from 37% to to 39.6% and then number two is he wants to change how much money you have to earn to be in this top tax bracket right now if you make over $669,500 you are in the top tax bracket what he wants to do is change that from $ 69,3 to $400,000 to be in the top tax bracket as a single person $400 $50,000 as a married couple to now be in the top tax bracket so he wants to change the top tax rate but also lower how much money you have to make to be in the top tax bracket the third thing President Biden wants to do is raise Medicare taxes on people making over $400,000 a year take a look The Proposal raises Medicare taxes on earned income and unearned income from 3.8% to 5% for those with incomes over $400,000 number four is if you have a kid he wants to give you a monthly check the way President Biden wants to do this is by increasing the child tax credit and the way that this child tax credit worked in 2023 is if you are a single earner who’s making under $200,000 a year as a single person or under $400,000 a year as a married person you would qualify for up to $22,000 in tax credits for every kid that you have that qualifies who wants to increase that amount to $3,600 if you have a kid that’s under six and $3,000 if you have a kid that’s 6 years old or over but the real interesting part of this proposal is President Biden’s proposing doing what was being done during the pandemic which was instead of just giving you a one-time tax refund or instead of just giving you this tax credit on your tax returns instead he’s proposing doing this through kind of like a monthly check where now you can kind of spread out the money you get from this tax credit and then you can use this money to help fund whatever you need for your kid so instead of getting $3,600 a year you get $300 a month in a check and the fifth thing the President Biden wants to do is to increase the earn income tax credit now this is generally a tax credit reserved for low to moderate income people you have to be making $64,000 a year or under to qualify for this tax credit but she wants to expand this tax credit for people that don’t have kids and he wants to expand this tax credit to Elder people as well essentially his proposal wants to make it easier for people to qualify for this additional tax credit especially if you’re low or moderate income this brings me to the second part of President Biden’s proposals which are now the investment tax changes that he wants to do and remember he wants to make four big changes here number one is he wants to get rid of crypto subsidies number two is he wants to eliminate L kind exchanges the real estate 1031 exchanges number three is he wants to increase capital gain taxes on the wealthy and number four is he wants to remove this concept of stepped up bases now I got to give you two little disclaimers here number one is although I am a licensed attorney I’m not your attorney so if you have specific tax questions talk to a tax adviser in your area and the second thing I want to let you know is that on May 21st 2024 I’m hosting a live free and virtual stock market investing Workshop where I’m going to going over my own stock market investing strategies and things you want to consider when you’re investing your money in the stock market in 2024 in this economy so if you want to learn more about investing your money in stocks whether it’s through funds ETFs mutual funds or index funds or investing in individual companies how to find undervalued stocks this is a completely free Workshop I would love for you to join me on May 21st at 8:00 p.m. and I got the link for you to register down in the description below the first thing the president wants to do in the crypto space is eliminate what are known as wash sales when it comes to taxes it’s already exist in the stock market and the way it works is let’s assume that you go out and you buy a crypto for $10,000 and then it goes down in value to let’s just say $44,000 now you still want to own this crypto so now you sell this crypto and now you have a loss of $6,000 because you sold the stock at a loss and then immediately after you sell you go out and you buy it again for $4,000 now you have this tax loss on paper and you own this crypto at $4,000 now generally the way this works in the stock market is you can’t realize these losses and then go on and just buy this stock again because that would be considered what’s known as a wash sale and you can’t do that and realize those tax losses in the crypto Market you can at least until now and this is where President Biden is working now to eliminate this type of tax loss where you can just sell this crypto buy it back again and just keep doing this again and again and again which can Al light to harvest some of these losses through this wash sale and he doesn’t want you to do that anymore the second thing President Biden is proposing is to eliminate the like kind exchange also known as a 1031 exchange in the real estate market because what he says is that this loophole is not seen in any other asset class so why do we need this in real estate now the way that the 1031 exchange Works in real estate is let’s assume you go and buy this property for I don’t know a million dollars then you own this property generating cash flow some years go by and now you find out that this property is worth $5 million now there’s a couple things that you could do you could just hold on to this property you could do a Cash out refinance or you could sell this property now when you sell this property you’re going to have a $4 million gain you bought it for $1 million you sold it for $5 million it’s $4 million of profit but what you can do in the real estate space is called a 1031 exchange which says that now you can take all $5 million go out and buy a bigger property if you take all $5 million to do that well now you don’t have to pay any money into taxes today you can keep doing this again and again and again asum you own the property for at least a year and a day and this like kind exchange allows you to own a property make cash flow see the depreciation sell it make the profits use the profits to buy a bigger property and not have to pay any money and taxes on these gains so long as you continue doing this 1031 exchange and this is where President Biden is saying no I don’t want you to keep doing that in real estate this should be taxed during this sale whether or not you do a 1031 exchange that should not exist now again that’s going to be a pretty difficult thing to pass but this is what he’s proposing the third thing the President Biden wants to do is raise capital gains taxes especially on wealthy people so what this means now is let’s just assume that you go out and you become a doctor and you make a million dollar a year from your job now if you make a million dollar a year from your job you already know that you have to pay the top tax rates which like I talked about in the beginning of this video are 37% at the time of we recording this video the new proposal is 39.6% so either you’re paying 37% of your income in taxes or 39.6 as your top tax rate now the interesting thing today is if you go out and you made a million dollars from your Investments maybe you sold a stock that you’ve owned for 5 years and you made a million dollars in profit so this is what you earned as a doctor this is what you made from your Investments the top tax rate today in the stock market or the investment market is called capital gains rate the top tax rate today is 20% this is how you hear of some wealthy people like Warren Buffett making hundreds of millions of dollars a year paying lower percentages of their income and taxes than his secretary because the secretary gets an ordinary income she earns money from her job and because she earns money from a job she pays the ordinary tax rate versus Warren Buffett makes money from his Investments and investment income comes at a lower tax rate and this is where President Biden saying if you make over a million dollars a year you should not qualify for these capital gains tax rates instead you should be paying the same ordinary tax rates or if you have a net worth of over $100 million a year you should be paying a minimum of 25% on your capital gains rates so essentially if you’re a wealthy individual you should be paying the ordinary tax rates on your investment income now you can see why this makes a lot of people upset because well if you’re accustomed to paying lower tax rates on your investment money you don’t want to pay more and some people are concerned that if you open this up for wealthy people now how long will it be until somebody making $100 a year has to pay the ordinary tax rates on their investment income as well but regardless this is one of the proposals were essentially that if you’re wealthy that instead of getting these capital gains rates you have to pay the ordinary tax rates on your investment income and the fourth change that President Biden wants to make on investment taxes is removing this whole concept of stepped up bases and the way that this works is let’s just assume that you go out and you buy this investment for $5 million and now it goes up in value to $20 million and now you have a couple options well if you sold this you would have a $15 million gain let’s assume you don’t get the 1031 exchange that’s a lot of money you have to pay in taxes because now you made a $15 million profit and whether you’re paying 20% or 39% of income in taxes that’s a lot of money you got to pay in taxes and now you’re thinking about well how am I going to pass on this asset right here to my kids I bought it for 5 million it’s worth 20 million what’s the best way for me to pass on this wealth to my kids but what there is right now is something called stepped up basis which means let’s assume that instead of you selling this asset that you bought for 5 million that’s worth 20 million that you just own this asset until you die well when you die what ends up happening to your kids when you give it to your kids is they get what’s called stepped up basis which says that essentially it looks like in the eyes of the IRS that your kids didn’t purchase this asset for $5 million it looks like in the eyes of the IRS that they purchased this asset for $20 million so you died this asset goes to your kids it’s worth $20 million and then they sell this asset the day after you die and now what they do is they get $20 million in their pocket but then they report to the IRS that they sold this asset for $20 million but their basis what looks like the purchase price is also $20 million because they got it when it was worth $20 million when you passed away so now their tax on that gain is essentially zero because it’s worth $20 million when they got it when you died and they sold it for $20 million that’s what stepped up basis is and this is where President Biden says I don’t want that to happen anymore and this brings us to the third section of this video which is the proposals that President Biden has on business and corporate taxes and there are five changes that he wants to make that I want to go over here number one is he wants to raise corporate taxes from 21% to 28% number two is he wants to get rid of deductions of employees and corporations that are making over a million dollar a year number three is he wants to quadruple the stock buyback tax number four is he wants to eliminate subsidies for oil and gas companies number five is he wants to eliminate corporate jet deductions so let’s jump into this so the first part of this is the President Biden wants to raise corporate tax rates from 21% to 28% and what you want to understand about this is that corporations pay what’s called double taxes they pay taxes on the corporate level and then they pay taxes on the individual level and the way that this works is let’s assume that this box is a corporation doesn’t matter what the corporation is but they go out and they make money they sell stuff this money goes into the corporation and then if the corporation makes a profit then this can be distributed to the owners of that Corporation so let’s play this out hypothetically let’s assume that this Corporation makes a million dollar in profit and this person right here with the mustache is the owner of this Corporation now you might be thinking well this person his Corporation just made a million dollars so he has to pay 21% in taxes on his money but that’s not how it works because first the corporation has to pay taxes if this is a C corporation there’s a couple different types of Corporations you have C corporations and S corporations this is what applies to C corporations if it’s a C corporation what that means is first on this million dollars the corporation is going to have to pay this tax either 21% to 28% in taxes so let’s just cut it down the middle let’s just assume this Corporation has to pay 25% of this money in taxes that means $250,000 right here goes to taxes which leaves $750,000 in the hands of the corporation now you might think that this owner gets to $750,000 in their pocket but that’s not how it works because it’s double taxation for C corporations which means now the corporation just paid the taxes on this money and now if the $750,000 went into the hands of this mustached man now this mustached man got $750,000 of income so now when you make the $750,000 worth of income guess what you have to pay ordinary taxes on the $750,000 now remember the income tax rates are the things that we discussed in the first part of this video which means that you’d be paying either the 37% or the newly proposed 39.6% as the top tax rate for this $750,000 so it’s a double tax system where corporations have to pay their own tax and then the individual pays their own tax as well now obviously there’s a lot of debate controversy and I guess a motion about corporate tax rates because some people say that you have these big corporations that aren’t paying their fair share and other people that are saying well if corporations have to pay higher taxes they’re going to make smaller profits they’re going to pass it down to their employees and at the end of the day what you have to remember is that corporations are really just made up of people and at the end of the day it’s people who pay taxes it’s not just invisible entities it’s people because the biggest corporations in the world are made up of people and it’s always people that pay taxes but I’ll let you decide whether this is good or not because I want to focus on what the tax bill is proposing in this video which brings me to number two President Biden wants to eliminate salary deductions on people making over a million dollars a year in these corporations so let’s go back to the same example that this mustache man owns this Corporation where the corporation is generating money now let’s just assume that this Corporation is making instead of a million dollar they’re making a $100 million in revenue and then over here is you got boss lady boss lady has a braid in Punjabi we call a braid a g in Punjabi my native language which we call a mustache a much so now boss lady right here with the braid she makes a lot of money because she’s the boss she’s the CEO of the company let’s assume that she makes $10 million a year as the CEO now if you make $100 million a year in Revenue not all the money is your profit because you got expenses to pay you got to pay property taxes you got to pay your insurance costs you got to pay operational cost you got to pay marketing cost you got to pay labor costs so let’s assume that you have $40 million in expenses before paying for Boston lady right here $40 million in expenses means you have 60 million left in the account but then you got to pay boss lady boss lady wants $10 million so now if you pay this lady $10 million that means you’d have $50 million left in the bank account and you’d have $50 million of taxable income because you have $50 million in expenses to run the business but this is where what President Biden is saying no we don’t want to allow deductions more than a million for a salary so even if boss lady wants $10 million you’ll only be able to deduct $1 million off of this $100 million of Revenue when it comes to the IRS taxes now what does that mean that means if you now have $40 million in expenses that means you have $60 million left in the bank account if you pay her $10 million that means you have $50 million left in the bank account but you only get to report $1 million worth of income which means when it comes to the IRS you have to pay the corporate tax tax es on $59 million even though you only have $50 million in the bank because this proposal says that you can only deduct up to $1 million worth of compensation primarily for officers but it can really be anybody in the company and anything beyond that you can pay but you’re not going to get a tax right off for that so you’re going to have to pay taxes on the money you pay out even though you already paid the money out you don’t get the deduction and the whole idea behind this is to hopefully according to President Biden reduce executive commissions and salaries that way you don’t get the incentive to deduct the income above $1 million for these Executives the third thing President Biden wants to do is raise taxes on stock BuyBacks take a look the president’s budget proposes quadrupling the stock buyback tax from 1% to 4% to address the continued tax advantage for BuyBacks and encourage corporations to invest in productivity and the broader economy in other words President Biden wants companies to stop doing stock BuyBacks and they want to discourage compan from doing stock BuyBacks by making it more expensive for you to do stock BuyBacks and because stock BuyBacks are more expensive he’s hoping that it will force companies now to take that money that they’re making in profits and either maybe give it away to dividends or maybe they use that money to reinvest it back into the company and grow the company even bigger number four is he wants to eliminate tax subsidies for oil and gas companies the budget eliminates special tax treatment for oil and gas company Investments as well as other fossil fuel tax preferences and number five well if you’re thinking about buying a corporate jet from your business well it might be a little bit more expensive because the final proposal here that I want to discuss is President Biden’s proposal to essentially eliminate the corporate jet tax benefit tax deduction for businesses President Biden wants to eliminate a tax break that gives preferential treatment for writing off corporate jet purchases and it would also increase the fuel tax on corporate and private jet travel I wanted to end this video with a fun one so let’s assume now that you do a business you run a business is making $10 million a year of profit and now you want to go out and buy this plane right here yeah it’s a l-sided plane but let’s just assume this is a good- looking plane right here you want to buy this plane and let’s assume that this plane costs $20 million but now what you can do to buy this plane is you can save up $20 million to buy this plane or what you could also do is you can Finance This Plane you take $2 million of your profit to go out and purchase this plane and you finance the other $18 million so you take $2 million out of a profit right here and you go out and you buy this $20 million plane now what you get to do previously before this if this gets passed is you can take a $20 million write off so you take $2 million out of your bank account you still have $8 million in your bank account but you get to take a $20 million tax break tax deduction which means on the irs’s eyes you don’t make $10 million you don’t make $8 million you made a loss of $10 million so not only do you not get to pay any money in taxes today you have $8 million in the bank you have a plane to fly but then next year you also get another $10 million tax deduction assuming that you get to make any money and then you can take this tax deduction and write it off on your future income that you make in the next year and this is one of the things that President Biden wants to get rid of as well now of course all of these things are proposals they haven’t been passed yet but these are the things that President Biden is proposing again if you have specific tax questions talk to a tax adviser in your are and if you want to read the full fact sheet I got the link for you down in the description and lastly on May 21st I have my stock market Mastery Workshop I would love to see you there and with that I’ll see you in the next video if you remember back earlier in 2024 the federis bank said that they would be cutting interest rates by their May 1st meeting which didn’t happen maybe we’re going to see another potential interest rate hike in the future the former United States Treasury secretary said you have to take seriously the possibility that the next interest rate move will be upwards rather than downwards

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Recommended:
Joe Biden’s Tax Proposal: https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/11/fact-sheet-the-presidents-budget-cuts-taxes-for-working-families-and-makes-big-corporations-and-the-wealthy-pay-their-fair-share/

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