Biden Wants To Replace IRA And 401(k) Tax Deductions With Tax Credits

The Biden Administration has proposed a plan that would “change the tax structure for all ERISA plans and IRAs,” Busch said during the virtual event. “Instead of giving investors a tax deduction, they’re talking about changing it to a tax credit. This may change the dynamics of IRAs and ERISA and 401(k) plans if they get this through, which is a part of what Treasury Secretary nominee Janet Yellen is working on over the next 100 days.”

The plan would replace the tax deduction for IRA and 401(k) contributions with a tax credit. 

According to Busch, doing away with these tax deductions could have a severe impact on the way Middle America saves for retirement. 

Another change that has been popular in conversation is the proposed corporate alternative minimum tax that would get rid of tax cuts for anyone that makes more than $400,000 a year.

President Biden proposed a $1.9 trillion package, but recently met with a group of Senate Republicans to discuss a “skinny stimulus” plan which would reduce the plan to $600 million. 

Busch further stated,

“Keep in mind how much stimulus has already been released,” he added. “Some $10.4 trillion has been allocated to the economy. If you are wondering why companies and stocks have recovered, this is why. And there is still $4 trillion that hasn’t made its way into the economy yet.”

It is important to keep these proposed changes in mind when considering your estate and retirement plans, as things could change soon. 

See Tracey Longo, Biden Wants To Replace IRA And 401(k) Tax Deductions With Tax Credits, Financial Advisor, February 1, 2021. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.