Many Americans abroad are cheering: Joe Biden, the new president of America, finally paying attention to the world and the environment. Better international relations and a good COVID crisis approach, according to proponents of Biden. But what impact will choosing Biden have on your US tax return as American Overseas?
Highlights tax increase
Below are the 6 highlights of Biden’s $ 4 trillion tax increase:
● Tax for income below $ 400,000 will not be increased.
● For income above $ 400,000, the tax rate will be increased from 37% to 39.6%.
● Tax on capital gains and dividends from a company is increased to 39.6% (it was 20%), also called the Tax Cuts and Jobs Act (TCJA) or Toll Tax.
● Increase of the fixed corporate tax from 21% to 28%.
● Biden institutes 12.4% extra social tax.
● It doubles the so-called “GILTI tax” from 10.5% to 21% for companies. This tax is levied on income from intangible assets (such as patents, trademarks and copyrights).
Child Tax Credit
In addition, Biden indicates that he is committed to increasing the Child Tax Credit: the relief that an American gets when he / she has a child. This should be increased to $ 3,000 for a child between the ages of 6 and 17 and $ 3,600 for a child under the age of 6.
Overall, he proposes raising tax on the rich and businesses by reversing some of the tax cuts signed by President Donald Trump in 2017.
These are a few of the measures and tax reforms that Biden intends to implement over the next four years. Whether he will implement them depends on the majority in the Senate and House of Congress.
What impact does this have on the Exit Tax?
A large number of Americans / Green card holders living abroad want to cancel their citizenship. And if the embassies had not (or have been) closed due to the Corona measures, the list of denounced citizens in the Federal Register of America would have reached a new record.
Biden’s possible new reforms mainly have a negative impact on people who give up their American citizenship and have to pay the so-called exit tax.
The Exit tax is, as it were, the settlement with the IRS for everything one owns at that time. This tax is based on the tax to be missed in the future.
With increasing income tax for income above $ 400,000 and for those with profitable businesses, the exit tax is expected to become exorbitant.
Want to know more about Biden’s impact on your US tax return?
We, the founders of Americans Overseas, were born in the Netherlands and received our American nationality through our (American) mother.
When we first heard about the Dutch-American tax treaty around 2013, we felt disbelief (this cannot be true after all), anger (why can one do this just like that), fear (will I now get fines or problems), and panic (what should I do).
It is (unfortunately) true that there is a US tax liability for Dutch nationals who acquired American nationality by birth. There was no information to us from the local government, the consulate referred us to the IRS, and the IRS was not accessible.
That is why we started this initiative to help people with good information, to prevent unnecessary panic, and to offer help without obligation and free of charge. If desired and necessary, we have a network of affordable professionals (accountants) who can help you with your US tax obligations.
Do you have questions about Joe Biden’s effects on your U.S. tax return? Then contact Americans Overseas.Contact us for more information