The American Families Plan
The last two weeks, we have talked about various tax plans introduced to the public by President Biden. This week we are going to fill you in on the American Families Plan and what that could mean for you. We know how overwhelming tax language can be. Our goal is to keep you informed with the basics, but it is still important to speak with a qualified accounting professional for more individualized needs.
The American Families Plan was introduced by President Biden at the end of April. It introduces action plans to address insurance premium costs, basic expenses, and investing in the children of this country.
Child Tax Credit
An expansion of the Child Tax Credit is one of the biggest points of this plan. It increases the credit from $2,000 to $3,000 for kids 6 to 17-years-old, and $3,600 for those under 6-years-old. This would become permanent through 2025, if passed. This money would also be sent to families on a regular basis, instead of making them wait until tax season for a lump sum.
Those making over $1 million a year would become subject to a tax rate of 39.6% on all of their income. This includes removing the current capital gains tax rate (20%) for those making over $1 million. That income would then be taxed at 39.6%, plus the 3.8% NII surtax, totaling a 43.4% tax rate for capital gains.
The plan calls for a total investment of $309 billion in order to add 4 additional years of free education to the current 13 provided. This would offer two extra years of preschool for 3 and 4-year-olds and two years of free community college post-high school. In addition, several billion would be allocated toward teacher training, the expansion of Pell Grants, and educator leadership programs.
An investment of $225 billion would be used to help American families with childcare, paid leave from work, and nutrition programs. Childcare costs for middle- and lower-class Americans would be on a sliding scale based on income to promote affordability. Along with that, tax credits would become permanent through 2025 for up to half of qualified spending on childcare.
Another aspect of the plan is funding a paid family and medical leave program. This would cover partial wage replacement for various medical and personal situations such as the birth of a child, ill loved ones, military deployment, and others. It would provide workers with up to $4,000 a month based on working income.
Where to go from here:
Once again, keep in mind that the American Families Plan has only been presented to the public, not Congress. It still needs to be brought to Congress and passed in both the House and the Senate before being signed into law. While many people in office support its passing, there is still the potential for it to be changed or knocked down entirely.
CPA On Fire can help you navigate these evolving waters as an entrepreneur. We will keep you posted on the updates as more changes roll out. In the meantime, schedule a free financial review with us to see what we can do to help you and your business.