With the election of Joe Biden to the Presidency, you're probably here seeking to understand how much your taxes are going to go up.
The answer: most people will see no tax increases.
The tax plan that Joe Biden has rolled out is targeted at individuals making more than $400,000 a year, less than 1% of the population of the US. If you (like me) are not one of these lucky individuals, then it's very-likely that nothing in this article is going to apply to you.
But, for argument's sake, let's hop in the Model S, drive over to the penthouse, and analyze what Biden's tax code plans mean for you.
If you make over $400,000 a year
First, Biden is going to impose a 12.4% tax on incomes over $400,000 to fund Social Security, split evenly between employers and employees. This is a new tax, because Social Security taxes in the past have been capped on income at or below $137,700.
People who made over $137,700 had a tax break where they didn't have to pay into Social Security for all of their income. Biden's tax plan still allows people making over $137,700 to not pay the Social Security payroll tax for income above that amount as long as they make under $400,000.
When your income exceeds $400,000, you then have to start paying the tax again. This creates an interesting tax structure where people's income at the very bottom and the very top of their income is being taxed for Social Security, but income in the middle is not.
Second, while Biden is likely to keep many of changes from the Tax Cuts and Jobs Act, he has stated that he is going to revert the marginal tax rate for individual incomes above $400,000 from 37% back to the previous 39.6%. As with the Social Security tax, this does not kick in unless your income goes above $400,000.
Individuals making above $400,000 will also have their incomes above $400,000 see itemized deductions capped at 28%. That means if your income is over $400,000 and your tax rate is over 28%, you have less options for itemizing your deductions to get a lower tax rate.
Some business owners have benefitted from deducting up to 20% of their business income as well as 20% of the dividends from qualifying Real Estate Investment Trusts (REITs) on their taxes. Biden is proposing phasing that out for incomes above – drumroll - $400,000.
But what if you're not just making $400,000 a year? What if you are making even more than $400,000 a year? What if you earn over $1 million a year? That's when Biden's really going to hit you where it hurts – your investments.
Most people pay taxes on what's called "earned income," referring to things like your salary at your job. The tax rates for that range from 10% to 37%, depending on how much you make. If you make money from investments instead, that's a whole different story.
If you buy an investment and sell it for a profit within one year of purchase, you would pay your normal income tax on any profit you make. But if you hold the investment for longer than a year, you pay a reduced tax rate between 0% and 20%, depending on your income.
If you make over $200,000 ($250,000 for married couples), you would also pay a 3.8% tax on net investment income. What Biden is proposing is taxing any income over $1 million the same regardless of it comes from your salary or your long-term investments.
The wealthiest people in the US have seen a large amount of their income come from investments, and this measure would keep the wealthiest Americans from paying less in taxes than average working people just because the money comes from holding stocks or real estate instead of a traditional job.
If you make under $400,000 a year
Let's say that you, like more than 99% of Americans, do not make $400,000 a year. Does this mean Biden's tax plan will not affect you at all? There's actually a decent chance you might see some changes to your taxes.
Biden is proposing bringing back the First-Time Homebuyers' Tax Credit, originally created to help the housing market during the Great Recession, and provide up to $15,000 for first-time homebuyers. With interest rates at historic lows, this may be another incentive for you to consider dipping your toes into the real estate game and becoming a homeowner.
Biden is also proposing expanding the Child and Dependent Care Tax Credit from $3,000 up to $8,000 for one dependent and $16,000 if you have multiple dependents. The maximum reimbursement rate would also adjust from 35% to 50%. If you have kids or other dependents, this may reduce how much you pay in taxes by giving you a child tax credit the money you spend to support your family.
Biden also has a few very targeted tax cuts and tax benefits that will apply to a much smaller group of people. One is expanding the Earned Income Tax Credit (a tax credit for low-income people who are very close to the poverty line) and allowing people over the age of 65 to also claim the credit even if they do not have dependent children.
He would also provide a refundable low-income renter's credit, reinstate tax credits for the purchase of electric vehicles and improvements to your home to make them more energy-efficient, as well as exempt forgiven student loans from taxable income. These may not apply to as wide a group of people, but if you're older, a renter, looking to live a more green lifestyle, or seeking forgiveness for student loans, Biden's tax proposals can have you looking at a smaller tax bill.
Biden's plans for inheritances
At first glance, it looks like everyone making more than $400,000 a year will pay higher taxes and everyone else will pay less taxes than they currently do. However, there is a part of Biden's tax plan that may have an impact on you even if you are lower income – if you have a rich family.
The Tax Cuts and Jobs Act raised the threshold at which estate taxes are paid and lowered how much they have to pay in taxes. If you stand to inherit an estate worth $11.6 million dollars today ($23 million if you are a married couple), right now you don't pay taxes on it.
If you inherit more than that, you would pay a top rate of 40% tax. Biden is proposing lowering the threshold where the tax would kick in back down to $3.5 million ($7 million for married couples) and raising the tax rate back to 45%. This will affect roughly 0.3% of estates. If you are in the 99.7%, you do not need to worry about the Biden inheritance policy.
Now, the next part is closing an inheritance loophole called the "stepped-up basis" loophole. Right now, when an heir inherits an asset, they only pay taxes on the gain in value of the asset from the time that they inherited it.
Let's say your parents bought $100 worth of stocks decades ago and today those stocks are worth $10,000. If your parents passed away and left you the stocks, you would be allowed to sell them immediately and not pay any taxes.
If you held the stock and the price rose to $12,000, you would only pay taxes on the $2,000 in value the stocks gained since you inherited it. This because the initial value of the stocks would be "stepped-up" to the value at the time you inherited it rather than the value at the time your parents bought it.
This loophole has allowed the very wealthy to leave very valuable assets to their children without needing to pay taxes and allowed generations to pass large fortunes to their children. Biden has proposed closing this loophole and not stepping-up the value of an asset when it is inherited; taxes will instead be paid on the value of the asset from when it was first purchased.
This part of the plan has yet to be fully fleshed-out by Biden, but it appears to be modelled after a proposal from the Obama administration. That plan allowed an exclusion of $100,000 per person (rising with inflation) and excluding $250,000 for primary residences ($500,000 for couples). It also allowed a 15-year payment period and tax deferrals for family-owned small businesses. Biden may roll out similar provisions once he rolls his tax plan out before congress.
Does any of the Biden tax policy outlines even matter?
Maybe?
Biden has presented something of a wish list for his tax plan, but that doesn't mean he can wave a magic wand on January 20th and put it into place. This plan will require significant negotiations in Congress, and if Republicans retain a Senate majority, they may refuse to even allow a bill to have a hearing. Ultimately, Biden's tax proposals may change significantly as they work their way through Congress and if they are not able to garner enough support, they may never come into effect.
Over two years into the most momentous event in our lives the world has changed forever … Some of us have PTSD from being locked up at home, some are living like everything’s going to end tomorrow, and the rest of us are merely trying to get by. When the pandemic hit we entered a perpetual state of vulnerability, but now we’re supposed to return to normal and just get on with our lives.
What does that mean? Packed bars, concerts, and grocery shopping without a mask feel totally strange. We got used to having more rules over our everyday life, considering if we really had to go out or keeping Zooming from our living rooms in threadbare pajama bottoms.
The work-from-home culture changed it all. Initially, companies were skeptical about letting employees work remotely, automatically assuming work output would fall and so would the quality. To the contrary, since March of 2020 productivity has risen by 47%, which says it all. Employees can work from home and still deliver results.
There are a number of reasons why everyone loves the work from home culture. We gained hours weekly that were wasted on public transport, people saved a ton of money, and could work from anywhere in the world. Then there were the obvious reasons like wearing sweats or loungewear all week long and having your pets close by. Come on, whose cat hasn’t done a tap dance on your keyboard in the middle of that All Hands Call!
Working from home grants the freedom to decorate your ‘office’ any way you want. But then people needed a change of environment. Companies began requesting their employees' RTO, thus generating the Hybrid Work Model — a blend of in-person and virtual work arrangements. Prior to 2020, about 20% of employees worked from home, but in the midst of the pandemic, it exploded to around 70%.
Although the number of people working from home increased and people enjoyed their flexibility, politicians started calling for a harder RTW policy. President Joe Biden urges us with, “It’s time for Americans to get back to work and fill our great downtowns again.”
While Boris Johnson said, “Mother Nature does not like working from home.'' It wasn’t surprising that politicians wanted people back at their desks due to the financial impact of working from the office. According to a report in the BBC, US workers spent between $2,000 - $5,000 each year on transport to work before the pandemic.
That’s where the problem lies. The majority of us stopped planning for public transport, takeaway coffee, and fresh work-appropriate outfits. We must reconsider these things now, and our wallets are paying
the price. Gas costs are at an all-time high, making public transport increase their fees; food and clothes are all on a steep incline. A simple iced latte from Dunkin’ went from $3.70 to $3.99 (which doesn’t seem like much but 2-3 coffees a day with the extra flavors and shots add up to a lot), while sandwiches soared by 14% and salads by 11%.
This contributes to the pressure employees feel about heading into the office. Remote work may have begun as a safety measure, but it’s now a savings measure for employees around the world.
Bloomberg are offering its US staff a $75 daily commuting stipend that they can spend however they want. And other companies are doing the best they can. This still lends credence to ‘the great resignation.’ Initially starting with the retail, food service, and hospitality sectors which were hard hit during the pandemic, it has since spread to other industries. By September 2021, the US Bureau of Labor Statistics reported 4.4 million resignations.
That’s where the most critical question lies…work from home, work from the office or stick to this new hybrid world culture?
Borris Johnson thinks, “We need to get back into the habit of getting into the office.” Because his experience of working from home “is you spend an awful lot of time making another cup of coffee and then, you know, getting up, walking very slowly to the fridge, hacking off a small piece of cheese, then walking very slowly back to your laptop and then forgetting what it was you’re doing.”
While New York City Mayor Eric Adams says you “can't stay home in your pajamas all day."
In the end, does it really matter where we work if efficiency and productivity are great? We’ve proven that companies can trust us to achieve the same results — or better! — and on time with this hybrid model. Employees can be more flexible, which boosts satisfaction, improves both productivity and retention, and improves diversity in the workplace because corporations can hire through the US and indeed all over the world.
We’ve seen companies make this work in many ways, through virtual lunches, breakout rooms, paint and prosecco parties, and — the most popular — trivia nights.
As much as we strive for normalcy, the last two years cannot simply be erased. So instead of wiping out this era, it's time to embrace the change and find the right world culture for you.
What would get you into the office? Free lunch? A gym membership? Permission to hang out with your dog? Some employers are trying just that.
The rising trend of pet-friendly offices is part of the effort to incentivize employees to come back to work in person. Many companies completely embraced the remote-friendly convenience of WFH. Digital nomad culture emerged and “second cities” arose when people exited New York, San Francisco, and LA, and headed to Denver, Austin, Charlotte, Nashville, and Raleigh.
But now, employees and employers have a choice to make. The question now is: to return or not to return to the office? This is no longer about forcing employees to commute. Post The Great Resignation, employees feel more empowered to leave in-person positions and seek out remote jobs. So if offices want people to return, they’ve got to do a ton to entice their employees.
Some huge companies with giant operating budgets are not worried. With major perks like shiny facilities and full-service food bars, they feel comfortable requiring in-office work days — even if it’s for a hybrid week. But the solution might be simpler: pet-friendly workplaces.
The Allure of Pet-Friendly Offices
According to the Washington Post, pet-friendly workplaces are becoming a common solution to improve employee morale and appease the rising number of pandemic pet owners. “As offices start reopening and thousands of workers are being called back for the first time in two years, some companies are allowing employees to bring their pets. About 23 million American households adopted a pet during the pandemic, according to the American Society for the Prevention of Cruelty to Animals. Many workers say they find pet-friendly environments an important perk for their new furry family members. A recent survey conducted by Banfield Pet Hospital, owned by Mars Inc., showed that 57 percent of the 1,500 pet owners polled said they would be happiest returning to a pet-friendly workplace. Half of the 500 top executives surveyed said they are planning to allow pets at the office. Tech companies including Google, Amazon, and Uber plan to continue to allow dogs at their offices, even with their flexible office policies.”
With so many people adopting and fostering since the pandemic, becoming a pet parent is a trend. And to welcome these new additions into people’s lives, it makes sense for some workplaces to welcome them into the office.
After spending unlimited amounts of time at home, many pets grew greatly attached to their “parents” — and pet-parents feel the same about their pets. Rather than keeping them locked in the house while their caretakers head off to work, this is a mutually beneficial solution to the current separation anxiety faced by pets.
Pets have also been shown to boost happiness in pet owners. According to heart.org, “Studies show that dogs reduce stress, anxiety, and depression; ease loneliness; encourage exercise and improve your overall health. For example, people with dogs tend to have lower blood pressure and are less likely to develop heart disease. Just playing with a dog has been shown to raise levels of the feel-good brain chemicals oxytocin and dopamine, creating positive feelings and bonding for both the person and their pet.” Most likely, this might have a similar effect on people who bond with animals at work that don’t even belong to them, lending an overall mood boost to the office.
The controversy behind pet-friendly workplaces
However, not everyone is as enthusiastic about the prospect. Some would rather keep the office separate from their personal lives. Some are allergic to pets. And some people simply don’t like animals.
Offices considering pet-friendly policies are weighing the pros and cons to keep everyone happy. According to the Washington Post, clear guidelines and communication can increase the chances of success.
“Before making the jump, pet experts say that leaders should first understand whether their employees have interest in, or strong feelings against, having a pet-friendly office. Doing an anonymous survey may allow employees to freely share thoughts on the matter.”
Overall, the key to a policy like this is flexibility. “Be ready to adjust: Above all, pet-friendly offices should be ready to listen and adjust their policies as they go. What works for one office may not work for another, but experts say proper planning can lessen much of the burden.”
Ensure your office is actually suited to the pets you want to welcome. “A well-developed pet-friendly office should be both safe and welcoming to pets. That means companies should consider blocking off areas that could be dangerous to pets as well as making sure pets have access to clean water, food, and places to rest.”
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Did you hear about the Great Resignation? It isn’t over. Just over two years of pandemic living, many offices are finally returning to full-time or hybrid experiences. This is causing employees to totally reconsider their positions.
For many employees, full-time remote work offered newfound flexibility to work around their schedules — whether it be picking up kids from school, or working when they feel most productive. Many employees seized this freedom to escape big cities and relocate and prioritize their quality of life. Remote-work lovers are demanding offices remain closed or requesting it as a benefit or work option. And if their company insists they return? Many would rather look for new jobs in the flourishing remote-first corporate environment.
However, some missed the structure of the office and its offers of accountability, collaboration, more amenities, and . . . friendship. But not all companies are created equal. Some hope to lure employees back by upgrading the office experience. Turns out, the millennial start-up with that Day-Glo ping-pong table and IPAbeer-on-tap isn’t actually the dream if it comes with a toxic work environment (we’re looking at you WeWork). As companies add in-office perks, employees are requesting more support, boundaries — and even arrangements like the four-day workweek.
For the best of both worlds, companies are adopting hybrid systems. However, reports from CNBC and BBC imply that this may be a taxing option. Having one foot in the office and the other in your office kitchen is far from ideal for most employees, research says.
LinkedIn’s 2022 Global Talent Trends report reveals that of the 500 C-level executives surveyed, 81% said they’re changing workplace policies to offer greater flexibility.
But according to CNBC, “emerging data is beginning to show that hybrid work can be exhausting, leading to the very problem workers thought it could solve: burnout. More than 80% of human resources executives report that hybrid is proving to be exhausting for employees. This is according to a global study by employee engagement platform TinyPulse. Workers also reported that hybrid was more emotionally draining than fully remote and more taxing than even full-time office-based work.”
BBC agrees, reporting: “Emerging data is beginning to back up such anecdotal evidence: many workers report that hybrid is emotionally draining … Workers, too, reported hybrid was more emotionally taxing than fully remote arrangements – and, concerningly, even full-time office-based work. Given many businesses plan on implementing permanent hybrid working models, and that employees, by and large, want their working weeks spent between home and the office, such figures sound alarm bells. But what is it specifically about hybrid working that is so emotionally exhausting? And how can workers and companies avoid pitfalls so that hybrid actually works?”
“Overall, human resources executives thought that hybrid and remote work were the most emotionally exhausting for employees, but that wasn’t the case,” Elora Voyles, a people scientist at TinyPulse, told CNBC.
So with every employee having various experiences and opinions about what works best for them and their lifestyles, it makes sense that people are job-hopping to suit their newfound preferences.
Frankly, some are job-hopping to enhance their compensation. Statistically, most people realize their greatest salary increases when they move from one job to another. Remaining at the same company for years and years often limits how much you can make as your career advances. One popular female finance guru, Cinneah El-Amin told Afrotech: “I am a staunch advocate for more women to job-hop, to get the money they deserve, and to stop playing small when it comes to our careers and the next step in our careers.”
The research supports this, with Zippia claiming: “Generally speaking, a good salary increase when changing jobs is between 10-20%. The national average is around 14.8%, so don't be afraid to ask for a similar increase. At a minimum, you should expect a wage growth of at least 5.8% when you change positions.”
However, a job search can be daunting, despite the potential benefits. But if you can land a role in a new company — and potentially boost your salary while you’re at it — you will challenge yourself and constantly keep learning. LinkedIn Learning, for example, is one platform that can help you level up your skills and give you an edge to land the job.
LinkedIn Learning allows you to take advantage of the moments that truly matter. It offers courses on subjects that will carry you through every step of your career. Their instructors have real-world experience.
Check out the LinkedIn Learning Pathfinder and it will generate a custom list of courses based on what you want to achieve. Learn more about recent top career development goals and acquire the skills to help you reach them.
Unsure what to do and how to start your job search? Let LinkedIn Learning be the first step you take in the path to a new and improved career.