Now in the 2020 tax-filing season, there is a flood of questions. To summarize this year’s tax season, the coronavirus pandemic affected some tax provisions. However, it did not affect tax rates and brackets.
Current Tax Brackets & Policy
Currently, individual tax codes have seven brackets for income taxes that range from 10% to 37%. This means that you pay 10% tax on the first dollar of taxable income, after applying your standard deduction.
The current tax rates and brackets were passed in December 2017, and they expire at the end of 2025. For 2026, the top rate is forecast to be 39.6%, though Congress has the ability to adjust rates even earlier.
The income brackets & levels are adjusted annually to account for inflation, although Congress switched to a less generous method in 2017 for calculating inflation adjustments on tax brackets and other key provisions. The Joint Committee on Taxation predicts that this will cost Americans $133.5 billion over the next 10 years.
While many thresholds in the tax code are adjusted for inflation, some important exceptions exist. Some benefits for homeowners, thresholds for taxes on Social Security benefits, and certain taxes on investment income will not be adjusted. Many Americans who are currently making under $38,700 a year are paying more taxes to the U.S. Government than they would if the limits were adjusted for inflation.
PRESIDENT BIDEN’S TAX AGENDA … AND WHAT IT MAY MEAN FOR YOU.
The 2021 income cap is $142,800, so there would be a gap in taxes between $400,000 and the amount exceeding that sum. The Social Security proposals that Biden is proposing have more procedural hurdles in Congress than other proposals.
LIMITING THE VALUE OF ITEMIZED DEDUCTIONS
Under the current income tax system, if you’re paying 37% in income taxes, then deductions save you 37 cents for every dollar. Under Biden’s proposal, a tax deduction saves a taxpayer with more than $400,000 no more than 28 cents on the dollar, even if that person’s top bracket is higher.
LIMITING THE 199A PASS-THROUGH DEDUCTION
The tax reform in 2017 gave businesses a 20% deduction for net income, including rental real estate. There is no formal proposal from the Biden campaign to end this tax break for business owners., but The Tax Policy Center’s analysis of the president’s proposal assumes that this change is consistent with his goal of rescinding 2017 tax breaks for high earners.
RAISING THE CORPORATE TAX RATE
For corporations, the tax rate would go up to 28% from 21%. There would also be a minimum tax on companies with lower effective rates and taxes on the U.S. company’s foreign earnings.
The Case for Virtual Assistants
No matter what your business, virtual assistants can help you! It starts with building the right systems and processes to have all job roles stay more focused on their most dollar-productive work. When we start to use virtual assistants, knowledge doesn’t get lost. When an employee has been working for a long time, it’s easy for them to forget what they’re supposed to be doing. Or what they’re not supposed to be doing. But, the VA can always refer back to the process. Or, they can even document what you have in place so that things are done properly and consistently.
Now is the time for us all to stop looking at hiring as a huge problem. It’s solvable. We just need to figure out a better way other than posting job listings over and over again on popular job boards and hoping that we’ll get lucky this time.
Have you tried this ultimate solution?
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Focus on your growth & scale your operations
ENVISIONING OF A NEW REALITY FOR YOUR BUSINESS
Simply put, MyOutDesk equips entrepreneurs & business owners with tools, strategies, and virtual employees – and when combined, businesses have a competitive edge and find growth while efficient systems and processes are put in place.
MyOutDesk proudly provides additional free business growth guides, books, and strategy calls.
See what we are about, and schedule a free consultation with us. We’ll take the time to learn more about your business and offer solutions to foster top talent and lower operational costs for your company.
Experience The Difference
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Did You Know? MyOutDesk’s origin story is set during the last global financial crisis of 2008. Yes, that’s right — our business started by scaling businesses with virtual assistants during a recession! Our first client in 2008 went from five to seventeen VAs with a completely revamped organizational model in short order, and he told MyOutDesk, “Our virtual professionals have shaved $250,000 off our monthly overhead.”