A tax hike is proposed for 2021 and beyond. Due to COVID-19, a tax hike makes most taxpayers anxious across all income levels. Whether you make more or less than average, a tax hike is usually an indication of paying more taxes. While the proposed tax hikes aren’t going to affect everybody, it’s still something that every taxpayer should know.
During the 2020 presidential campaign, there were strong indications of a tax hike. Biden promised every taxpayer who’s making less than $400,000 every year won’t pay higher taxes. This is on the individual scale though. Many small businesses make well over $400,000 in taxable income, but the income is used for expanding operations and overall covering the costs.
Corporate tax hike
A corporate tax hike is aimed at making sure that large corporations pay taxes. The companies as large as Amazon had fiscal years where they did not pay a single dime in federal taxes. Although it sounds crazy that a company like Amazon doesn’t pay any federal taxes, it’s easy for many as they take the advantages of deductions and credits given to corporations to the fullest.
The upcoming tax hike for corporations is what’s going to change these and make sure that they pay their fair share of federal income taxes. It’s still a question of whether these will have any impact on the workforce employed by these corporations. The government might bring certain obligations for corporations so that a tax hike doesn’t create unemployment.
Higher tax bracket rates for individuals
The highest marginal tax rate as of 2021 is 37 percent and that’s for taxable income over about $500,000. With the tax hike, higher marginal tax rates of as much as 45 percent are expected to be added to the brackets and lower income thresholds for these rates. Changes like these can certainly make an individual or married couples filing a joint return pay more in taxes.
Since the tax bill is still under development, it’s hard to say when exactly we will see the tax hike. Many of the tax changes that were brought with the Tax Cuts and Job Act of 2017 run through 2025. There is still a good four years left for the major changes to expire. The new tax hike will have a mixed batch of things that were added to the tax code in late 2017 and other changes that intend to increase taxes.