Don’t let the first 2020 presidential debate cloud your vision: Even though former Vice President Joe Biden’s tax policy plans only briefly took the spotlight, they aren’t something you want to gloss over.

The Democratic nominee on Tuesday highlighted plans to restore the top-line tax rate to where it was before the Tax Cuts and Jobs Act (TCJA) of 2017. Biden also reportedly wants to raise corporate taxes and levies on long-term capital gains for the country’s highest earners — all of which would likely be necessary to fund trillions of dollars worth of new proposals at a time when the budget deficit has soared to its widest on record, largely in response to the coronavirus pandemic.

Those policies would be a substantial change from President Donald Trump’s approach to taxes, although experts say it’s mostly high-income earners who would feel the biggest impact.

Here’s five ways your taxes could change if Biden is elected and how to prepare your finances for the possibility of a different tax environment in the future.

1. Income taxes: High-income earners would see a tax hike

Biden has been vocal about leaving taxes alone for those who make less than $400,000 annually. But high-income earners might have even more wriggle room than that pledge implies, at least when it comes to Biden’s income tax proposals.

The nominee wants to boost the top-line income tax rate to 39.6 percent from 37 percent. According to the Internal Revenue Service’s 2020 tax brackets (which apply for taxes filed in 2021), the top-line rate applies to single filers who earn $518,401 or more and married filers who make $622,051 or higher.

And even though it might feel like a substantial change, it isn’t totally out in left field. The TCJA’s income tax deductions are currently set to expire in December 2025, meaning they would go back to this level if left untouched, regardless of who occupies the White House.

“Democrats have a built-in advantage on the income tax,” says Jeffrey Levine, CPA and director of advanced planning at Buckingham Wealth Partners. “If nothing happens in 2025, most of that goes back to the way it was before. So the way I look at it, even if they win everything, it may not be the first thing they do because there’s at least a backstop for that.”

2. Capital gains tax and estate planning: Changes to long-term gains rates for high-income earners and a ‘loophole’ for inheritances

If you earn more than $1 million a year, the profits you earn on your investments such as stocks or real estate would also be taxed differently under the Biden administration.

What’s called capital gains, those earnings would be taxed as ordinary income, regardless of whether they’re held over the short or long term (two distinctions that are typically used for taxation purposes). For the wealthiest investors, capital gains would be taxed at 43.4 percent instead of 23.8 percent.

Meanwhile, Biden also wants to adjust a provision commonly referred to as a “step-up in basis” that lets investors hold onto an asset, watch it grow and then pass it along to an heir after death, resetting the threshold for gains at the point of transfer.

“This is a way that lots of capital gains escape taxation altogether,” says Gordon Mermin, senior research associate at the joint Urban Institute-Brookings Institution Tax Policy Center. “If someone buys an asset, it appreciates quite a bit. They hold onto it, they never sell it until they die, and then when they die, the person who inherits it gets it.”

3. Tax credits: Would-be homebuyers and parents might want to pay attention

While much of Biden’s tax plan seems laser-focused on targeting high-income earners, analysts say the most substantial impact on low- and moderate-income individuals rests within the Democratic nominee’s tax credit policies (along with a separate retirement proposal that has some tax implications).

Biden wants to help first-time homebuyers purchase their first property by providing a $15,000 tax credit. That’s similar to a Great Recession-era policy, which gave individuals a 10 percent break capped at $7,500 during the Bush administration and $8,000 under the Obama-era White House.

The nominee also wants to expand a child care tax credit that families with children up to 13 years in age could use to subsidize half of their child care costs, as long as it doesn’t exceed $8,000 (or $16,000 for two or more children). The Child and Dependent Care Tax Credit (CDCTC) currently covers a maximum of $3,000 for families with one child (or $6,000 for households with two or more children). Under Biden’s proposal, families making less than $125,000 annually would be eligible for the full 50 percent credit. After that threshold, a partial credit would be available to individuals whose incomes come in under $400,000.

With a similar proposal in response to the coronavirus pandemic, Biden also wants to increase the Child Tax Credit to $3,600 for children under the age of 6 and to $3,000 per child for those between the ages of 6 and 17.

4. Itemized deductions: Mortgage interest rate deductions, charitable contributions might not provide as much of a break

A more technical aspect of Biden’s tax policy plans, the Democratic nominee wants to institute an overall cap of 28 percent on itemized deductions. While only a marginal 10 percent of all taxpayers take advantage of this, about 50 percent of those in the top income bracket do, according to the Committee for a Responsible Federal Budget.

Examples of such deductions include mortgage interest paid, charitable giving and state and local taxes of up to $10,000.

Here’s how that 28 percent cap would work: Individuals in the top-income bracket would see a 28-cent tax deduction for every dollar deducted, rather than today’s 37 cents deduction. Essentially, it “claws back some of the tax savings” that high-income earners in particular are used to getting, Mermin says.

Given that Biden’s plan includes both a higher rate and a cap on itemized deductions, those moves “not only make income tax higher, but the deductions worth less in the future,” Levine says.

5. Payroll taxes and corporate taxes: Though paid by employers and corporations, they might still add to your wallet

Though not impacting consumers directly, Biden’s proposed corporate tax and payroll tax changes might eventually trickle down to everyday Americans’ wallets.

The Biden plan includes boosting corporate taxes from 21 percent to 28 percent. Before the TCJA, that rate was 35 percent, one of the highest rates among industrialized nations, according to Michael Reynolds, CFA, investment strategy officer at Glenmede.

While it won’t impact consumers’ wallets directly, research suggests that employees end up bearing the brunt of that cost in their paychecks in the form of lower wages, though estimates on how much vary. For investors, that tax hike could also end up weighing on your stock portfolio in some capacity.

“There’s often some tough decisions when budgets get compressed, as they do in recessions, and it can be very similar in an environment where tax rates are going higher,” Reynolds says. “If you’re a shareholder, all else equal, this is a headwind to profitability.”

Biden also reportedly wants to adjust the way payroll taxes apply to individuals who make $400,000 and up. Currently, individuals are taxed a 12.4 percent Social Security tax as long as they make $137,700 or less. The change, however, would leave what some tax policy experts call a “donut hole,” given that it excludes a substantial number of upper-income earners. But it’s for a reason, according to Garrett Watson, senior policy analyst at the Tax Foundation.

“That donut hole, that wage gap, rises every year, and it will eventually close, and maybe in 20 to 30 years, that hole will disappear altogether and all wages will be taxed for Social Security,” Watson says. “The challenge in applying it lower is because the campaign has been so laser focused on not raising taxes for those who make [under] $400,000.”

Here’s how taxpayers can prepare for a possible political shift:

1. Avoid knee-jerk reactions or making any changes right now

Households directly in the line of fire of this tax policy might be tempted to consider reviewing their tax plans. Some of these steps could include harvesting capital gains, pushing forward with deductions or accelerating conversions into a Roth 401(k) or IRA. But accountants and portfolio managers caution against making any decisions right now, when the future is far from certain.

That’s because these policies might not be economically viable or a day one priority, given that the economy will still be bouncing back from the coronavirus pandemic. Passing many of these proposals might also require that the Democratic ticket sweep both chambers of Congress. Even so, more moderate-leaning Democrats might be hesitant to push forward with some of these changes, meaning these proposals might look different in their final form.

“Those are all activities that you could easily do in November or early December with no added consequences from today but with a lot more information,” Levine says. “The viability is 110 percent dependent upon the election.”

2. Start talking with a financial adviser, particularly if you are an ultra high-net worth individual

But it’s never too late to start working with a financial adviser, Levine says, particularly if you are a high-net worth individual.

Some of the highest earners might be considering gifting assets out of their name. The valuation process can often take some time, even in normal circumstances. Add an unprecedented coronavirus pandemic and a contested election year, and that process will only take longer. You might no longer have time to kick start that process come November, he says.

3. Keep in mind the economic impact of a higher taxes policy

Policy experts say that boosting taxes will be necessary to fund portions of Biden’s plan, given that lawmakers will be unwilling to run solely off of deficit spending.

Proponents of Biden’s proposals suggest that canceling some portion of student loan debt, making college free for some families and creating a public option for health insurance might boost growth. But it’s still going to come with cost.

Watson’s team at the Tax Foundation estimates that these new proposals would raise about $3 trillion in revenue, which wouldn’t be enough to entirely fund all of Biden’s spending proposals. Meanwhile, the plan might modestly weigh on economic growth by about 1.47 percent in the long run, leading to about 518,000 fewer full-time jobs, the Tax Foundation estimates.

You might want to prepare for a slower period of growth in the context of rising taxes altogether, either by boosting your savings or reducing your expenses as much as you can.

“Should the U.S. adopt much more robust spending on social insurance like many folks in Europe have, the big takeaway there is Northern Europe finances those benefits through broad-based taxation,” Watson says. “Obviously Biden isn’t quite advocating to that extent in terms of spending, but that’s the direction you’d have to head if you want those kinds of benefits and that they’re going to be adequately financed in a sustainable manner.”

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