BIden's Tax Increase for those making $400000+

[SavingBucks]

Biden has indicated that part of his plan is a tax increase only for those making $400K or more. It will be interesting to see if this will be enacted if he is elected. So here is my dumb question -- is this gross income or taxable income (after standard deduction or itemized deductions)? My gross income is decreased by pre-tax 401K and 357 contributions). I am also assuming that only the portion of the amount over $400K will be subject to the additional tax.

Thanks in advance..................

[kork13]

It depends a great deal on how any forthcoming legislation is written. But typically, such things are based upon AGI, "adjusted gross income." That includes all of your earned (W2, 1099, business, etc.) & unearned (rental, investment, royalty, etc.) income sources, less a variety of adjustments. Those include pre-tax retirement/HSA contributions, business/rental expenses, college tuition or student loan interest, half of self-employment taxes, and a variety of others... To include standard or itemized deductions. Your AGI will always be less than your gross income.

[bjl584]

If I made over $400K a year I would be able to afford an attorney and a CPA who could make sure I didn't pay any taxes.

[disneysteve]

If I made over $400K a year I would be able to afford an attorney and a CPA who could make sure I didn't pay any taxes.

And that's why those tax increases never bring in as much revenue as predicted.

[amarowsky]

And that's why those tax increases never bring in as much revenue as predicted.

Yet another reason why our tax code is an over complicated joke.... And ought to be simplified.

[kork13]

Yet another reason why our tax code is an over complicated joke.... And ought to be simplified.

Seriously!!!!

Of course, of they actually followed through on enabling taxes to be filed in a postcard, they'd put a couple industries out of business... Lol

[Singuy]

Looking at Biden's tax plan, you are screwed for any income above adjusted gross income of above 400k. The increase in taxes for the federal portion is peanuts compared to the additional payroll taxes you'll have to pay. "Security payroll tax of 6.2% each on employer and employee on all earned income of $400,000 or more", while "no additional Social Security tax would be imposed on wages between the wage base, currently $137,700, up to $400,000."

I don't know too many people actually that has a salary of above 400k adjusted because as a business owner, you're suppose to lower your "salary" to a "reasonable" amount to take advantage of a tax loophole. CEOs and upper management are generally compensated in the form of stock options, bypassing the salary related taxes. I don't see any changes to capital gains tax so I guess for the majority of people, the tax increase doesn't really affect them.

[Fishindude77]

Looking at Biden's tax plan, you are screwed for any income above adjusted gross income of above 400k. The increase in taxes for the federal portion is peanuts compared to the additional payroll taxes you'll have to pay. "Security payroll tax of 6.2% each on employer and employee on all earned income of $400,000 or more", while "no additional Social Security tax would be imposed on wages between the wage base, currently $137,700, up to $400,000."

I don't know too many people actually that has a salary of above 400k adjusted because as a business owner, you're suppose to lower your "salary" to a "reasonable" amount to take advantage of a tax loophole. CEOs and upper management are generally compensated in the form of stock options, bypassing the salary related taxes. I don't see any changes to capital gains tax so I guess for the majority of people, the tax increase doesn't really affect them.

Yep, just Biden blowing smoke to the general voting public about how the rich don't pay enough and how he's going to change that.
Meanwhile, it will have barely any effect on high earners like Biden himself.

[disneysteve]

Yep, just Biden blowing smoke to the general voting public about how the rich don't pay enough and how he's going to change that.
Meanwhile, it will have barely any effect on high earners like Biden himself.

So how do we go about increasing taxes on high income earners in a way that will actually work? Raising the cap on the income subject to SS tax is one way but surely there must be others. Maybe it's the stock options that need to be looked at and taxed differently if that's where a lot of their compensation comes from. I know they have done luxury taxes before on things like yachts and jets that are only purchased by the wealthy, so some sort of consumption tax maybe. Or maybe just going to a national sales tax so that those who spend more pay more, and do something to make it less regressive so that the lower income folks don't get buried by it.

[corn18]

Get rid of all deductions and credits. All of them. Tax everything as ordinary income. Pick your tax brackets to be as progressive as you like. My local taxes are simple: how much did you make? Give us 1% of that. Only one bracket so it’s regressive.

[LivingAlmostLarge]

Looking at Biden's tax plan, you are screwed for any income above adjusted gross income of above 400k. The increase in taxes for the federal portion is peanuts compared to the additional payroll taxes you'll have to pay. "Security payroll tax of 6.2% each on employer and employee on all earned income of $400,000 or more", while "no additional Social Security tax would be imposed on wages between the wage base, currently $137,700, up to $400,000."

I don't know too many people actually that has a salary of above 400k adjusted because as a business owner, you're suppose to lower your "salary" to a "reasonable" amount to take advantage of a tax loophole. CEOs and upper management are generally compensated in the form of stock options, bypassing the salary related taxes. I don't see any changes to capital gains tax so I guess for the majority of people, the tax increase doesn't really affect them.

Actually NOT True. There is a large contingent of people who are Dual Income working families who can easily hit this number. Each person making $200k and bam you are there. Coastal cities hit this all the time. And all are w2 workers. Most people hitting this $400k i don't think are small business owners not because of deductions but because they probably aren't making that much to begin with. Maybe they are clearing $200k but starting at $400k. w2 workers and we aren't talking Software engineers but more like project managers, analysts, etc each easily make 100-200k and there is the $400k family income with both parents working.

Now that also makes like a little more dicey when that happens. And I think most people with a w2 job and clearing $400k what can a lawyer and CPA help you? And owners who have stock options have to pay taxes when it hits. You get $1m bonus? You are taxed as the $1M as income. You usually hang onto it and pay capital gains but they have tons of equity.

And people who work with stock bonuses? You usually minimally sell to cover. So you are taxed at 37% on your $200k stocks. Amazon this is what happen. Base Salary caps at $165k for EVERYONE. Then all the rest of your income is stock. You get $1M in stock in a year? You can't even pay the taxes on it from your salary. You have to sell. And the selling usually doesn't cover it because the stock is income NOT LTC.

DH's cousin is 30 and she makes around $200k. She'll be married and in the $400k family income. But they won't be "wealthy".

[ua_guy]

Actually NOT True.

This is the situation we are in. I can say with certainty that there is no way for a CPA or accountant to "fix" taxes so we don't pay. When you earn your money through regular W2 wages, bonuses, and RSU's in a dual-income household in a high COL area, $400k is a pretty easy target to hit. And when you own only one home and don't have a business to claim losses or play with assets, you pay taxes per IRS rules. Taxes totaling more than a household well above a median income in the US on an annual basis. Are we dumb? No. Point is, Biden's 400k target isn't smoke and mirrors. But no, it doesn't target the super-rich who have access to greater loopholes.

Also worth noting we pay significantly more under Trump's tax plan which was enacted in 2018. The removal of certain deductions and reduced limits on others especially in high COL (blue) areas, it absolutely bilked middle-upper income folks. His tax plan is a damn lie and a joke to boot. It truly benefits the super-rich.

[LivingAlmostLarge]

This is the situation we are in. I can say with certainty that there is no way for a CPA or accountant to "fix" taxes so we don't pay. When you earn your money through regular W2 wages, bonuses, and RSU's in a dual-income household in a high COL area, $400k is a pretty easy target to hit. And when you own only one home and don't have a business to claim losses or play with assets, you pay taxes per IRS rules. Taxes totaling more than a household well above a median income in the US on an annual basis. Are we dumb? No. Point is, Biden's 400k target isn't smoke and mirrors. But no, it doesn't target the super-rich who have access to greater loopholes.

Also worth noting we pay significantly more under Trump's tax plan which was enacted in 2018. The removal of certain deductions and reduced limits on others especially in high COL (blue) areas, it absolutely bilked middle-upper income folks. His tax plan is a damn lie and a joke to boot. It truly benefits the super-rich.

I'd still rather be earning more than $400k than not

[disneysteve]

Get rid of all deductions and credits. All of them. Tax everything as ordinary income. Pick your tax brackets to be as progressive as you like. My local taxes are simple: how much did you make? Give us 1% of that. Only one bracket so it’s regressive.

There certainly has been talk of a flat tax for years, which exemptions to keep it from being overly regressive.

[disneysteve]

Also worth noting we pay significantly more under Trump's tax plan which was enacted in 2018. The removal of certain deductions and reduced limits on others especially in high COL (blue) areas, it absolutely bilked middle-upper income folks.

For sure. We've talked about that here before. His tax hike affected so many people around here (also a blue state). Our taxes went up thousands of dollars because of the increase he enacted. I'm hoping if Biden wins he will reverse that as he has suggested he will.