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Biden Tax Plan and the Importance of Tax Planning

It’s been an interesting few days with the election. I think we are in for a rollercoaster for the next couple of weeks.

A lot of people have been asking me how their taxes will differ under the Biden Administration if he becomes President-Elect. Remember these are just proposals and they would need to pass the house and senate to become law. The following discusses Biden’s proposed tax plan as of October 22, 2020. These changes affect individuals, corporation,s and estate, and gift taxes.

The Tax Cuts and Jobs Act (TCJA) would be immediately repealed. This means the Affordable Care Act provisions would be back in place.


· Reverts the top individual income tax rate for taxable incomes above $400,000 (married filing joint and $200,000 single) from 37 percent under current law to the pre-Tax Cuts and Jobs Act level of 39.6 percent.

· Taxes long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent on income above $1 million and eliminates step-up in basis for capital gains taxation.

· Caps the tax benefit of itemized deductions to 28 percent of value for those earning more than $400,000 (married filing joint and $200,000 single), which means that taxpayers earning above that income threshold with tax rates higher than 28 percent would face limited itemized deductions.

· Restores the Pease limitation (phase out) on itemized deductions for taxable incomes above $400,000.

· Phases out the qualified business income deduction (Section 199A) for filers with taxable income above $400,000 (married filing joint and $200,000 single).

· Imposes a 12.4 percent Old-Age, Survivors, and Disability Insurance (Social Security) payroll tax on income earned above $400,000, evenly split between employers and employees. This would create a “donut hole” in the current Social Security payroll tax, where wages between $137,700, the current wage cap, and $400,000 are not taxed.

· Expands the Earned Income Tax Credit (EITC) for childless workers aged 65+

· Provide renewable-energy-related tax credits to individuals.

· Expands the Child and Dependent Care Tax Credit (CDCTC) from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents) and increases the maximum reimbursement rate from 35 percent to 50 percent.

· For 2021, and as long as economic conditions require, increases the Child Tax Credit (CTC) from a maximum value of $2,000 to $3,000 for children 17 or younger, while providing a $600 bonus credit for children under 6. The CTC would also be made fully refundable, removing the $2,500 reimbursement threshold and 15 percent phase-in rate.

· Reestablishes the First-Time Homebuyers’ Tax Credit, would provide up to $15,000 for first-time homebuyers.

Estate Tax

· Reduces the gift tax exemption to 2009 levels, this would be $13,000 gifts per individual

· Reduces the estate tax lifetime exemption to 2009 levels, this would be $7 million (married filing joint) and $3.5 Million single

· Repeal the present law “step-up in basis” rule that increases the tax basis for inherited assets to their full fair market value upon death. This rule—which ‘carries over’ an asset’s tax basis from the testator to the heir—likely would entail a significantly greater overall tax burden with respect to transferred assets than would the decreased exemption. What does this mean in non accounting speak? If you inherit your families home that was purchased in the 1980s you do not get the value of the property at the date of death of your loved one. You inherit the property at the price it was originally purchased for in the 1980s.

Business Changes

· Increases the corporate income tax rate from 21 percent to 28 percent. It is anticipated that flow throughs (S Corps, Partnerships and Schedule C’s could go up by the same percentage).

· Establishes a Manufacturing Communities Tax Credit to reduce the tax liability of businesses that experience workforce layoffs or a major government institution closure

· Expands the New Markets Tax Credit and makes it permanent.

· Offers tax credits to small business for adopting workplace retirement savings plans.

· Expands several renewable-energy-related tax credits, including tax credits for carbon capture, use, and storage as well as credits for residential energy efficiency, and a restoration of the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit. The Biden plan would also end tax subsidies for fossil fuels.

If Biden does become President Elect it is now more important than ever to schedule a tax planning meeting. We take a proactive approach and discuss these items, how they personally affect you, your family and your next year’s tax return. We plan for the worst and then make changes today to put you into the desired tax situation for next year. Once we get into 2021 there is not much we can do as we are in a reactive position in preparing your 2020 tax return.

Also, remember if you received a stimulus payment most likely those were pre-refunds which will be included on your 2020 tax return. So if you usually get a refund, your refund will be less next year. If you usually owe, you may owe more next year and if you are in a neutral position it may push you into a category of owing money.

Now is a critical time for planning. We are available for appointments at your convenience and can do them remotely via Zoom and Go To Meeting or in person.

Please call or email us for more information and questions.

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Jocelyn Sihathep (Jo1)

Office Manager

We have a Sun Devil in the house! We are honored to add to our team, Jo. She is a graduate of Arizona State University (Fear the Fork) and is looking to broaden her knowledge and understanding of business and accounting.

She is the engine of our fine-tuned machine. Her “can do” attitude, commitment to customer service and outstanding organization skills allows us to focus on what matters most, our clients. She is amazing with technology and strives for excellence. She embraces the entrepreneurial spirit and is a great asset to our team.

Jocelyn Weatherley (Jo2)


Jo was previously an accountant for a $60M company and their 13 subsidiaries. She is in charge of our accounting and bookkeeping department and serves our clients on their time schedule. Whether it is weekly, monthly or quarterly she helps provide reliable, useful and accurate information to our clients on their terms.

Jo performs full accrual accounting and is responsible for reconciling all accounts, journal entries, month end closing procedures and preparation of internal financial statements and analytics. She also assists in the preparation of sales and payroll tax returns. She holds a wide range of knowledge, from QuickBooks to travel (she spent most of her life in the UK), she’s your girl. She is excited to join the CCA team and ready to conquer tax season head on!

Dixie Cary

CPA and Tax Manager

Dixie is a Minnesota CPA and experienced accountant. She has over 25 years of accounting in both audit and tax, but her passion is tax. After years in the cold, she decided to leave the mid west and find a new home in Sunny Arizona. We are so happy that Dixie has joined our team.

Dixie leads and manages our entire tax department. She assists and leads a team through our busiest times while delivering quality, complete and accurate tax services for our clients. She is proficient in preparation, planning, and education of federal and state income taxes for individuals, businesses, estates, trusts, and exempt organizations.

Theresa Elaine Valade

CPA and Managing Partner
Theresa has over 27 years of experience in tax, audit and consulting. She was with the International CPA Firm of Arthur Anderson in Phoenix and San Francisco. She most recently was a partner with Moffitt & Company, P.C. Her areas of specialization are business consulting and advisory, audits, income tax planning and preparation, and IRS audit representation. Her industries of specialization are nonprofits, real estate, hospitality, franchises, mortgage banking and brokering, title insurance, escrow, health, and beauty.
One of Theresa’s biggest honors is being named the 2020 CPA firm of the year for her commitment and service to her clients during the challenges imposed by the COVID-19 pandemic. Putting passion and personalization at the forefront Theresa has led her firm to excellence by not only providing measurable results for clients but making them feel well taken care of during times of great uncertainty.
Theresa is also a member of the prestigious, Arizona Society of CPAs, ASCPA, 100% Membership Club. It is an honor to be part of this club that exhibit’s a high level of commitment to the Arizona Society of CPAs. We are privileged to be able to convey to our clients, staff, and colleagues of Theresa’s significant commitment to the CPA profession.