Biden's Tax Plan Calculator

What is Biden's tax plan?

Biden's tax proposal, put forward during and after the 2020 presidential campaign and incorporated into the American Families Plan and Build Back Better framework, aimed to raise revenue primarily from high earners and corporations while expanding tax credits for working and middle-income families. The headline change for individuals is raising the top marginal income tax rate from 37% back to 39.6% (the pre-TCJA rate) for households earning more than roughly $400,000. For everyone else, the ordinary income brackets stay the same. On top of that, Biden proposed taxing long-term capital gains and qualified dividends as ordinary income (at 39.6%) for taxpayers earning more than $1 million, replacing the preferential 20% rate those earners currently enjoy. Coupled with the existing 3.8% Net Investment Income Tax, that would push the top federal rate on investment income to 43.4%.

How the expanded credits work

The plan proposed large expansions to three major tax credits. First, the Child Tax Credit would rise from $2,000 to $3,600 per child under 6 and $3,000 per child ages 6-17, and would be made fully refundable so that families with little or no tax liability still receive the full amount. Second, the Earned Income Tax Credit for childless workers would nearly triple from a maximum of about $543 to $1,502, and the eligible age range would expand downward from 25 to 19 and upward to include workers 65 and older. Third, the Child and Dependent Care Tax Credit would increase from covering up to $3,000 of qualifying expenses (for one dependent) at a 20-35% rate to covering up to $8,000 (one dependent) or $16,000 (two or more) at a 50% rate, fully refundable for lower-income families. Together, these credit expansions mean that most working families with children would see a net tax cut under the Biden plan, even without any change to the ordinary income brackets.

The Social Security payroll donut-hole

Under current law, the 12.4% Social Security payroll tax (split evenly between employer and employee) applies to wages up to a cap ($184,500 in 2026) and then stops completely. Biden proposed reopening that tax on wages above $400,000, creating a gap - or donut hole - between the wage base and $400,000 where no Social Security tax would apply, but above $400,000 the 6.2% employee share (and matching employer share) would resume. For a household earning $500,000 in wages, this adds about $6,200 in additional employee-side payroll tax. For most earners the payroll portion of the Biden plan has no impact, since their wages fall below the existing cap.

Who pays more and who pays less

The distributional picture is roughly as follows. Households earning under $400,000 in ordinary income and not relying heavily on long-term capital gains would generally pay the same or less in federal tax under the Biden plan, thanks to the expanded child tax credit, child care credit, and EITC. Families with young children and moderate incomes can see savings of several thousand dollars per year from the enhanced credits alone. Households earning above $400,000 would see their marginal tax rate rise by 2.6 percentage points on income above that threshold, which translates to a real but moderate increase for incomes in the $400,000-$1,000,000 range. The largest increases fall on households earning more than $1 million with significant investment income, who would face a near-doubling of the capital gains rate from 23.8% to 43.4%.