It is clear that President-elect Biden will be the next President of the United States. Yet, whether Biden will be able to move his agenda forward or face a divided Congress is an open question. It is that uncertainty that can be problematic for those who are curious as to how to do their tax planning for the future.
As you may know, some of the major tax proposals from President-elect Biden include:
1. Increasing the top tax rate on income from 37 percent back to the 2009 rate of 39.6 percent;
2. Not raising taxes on individuals earning less than $400,000 per year;
3. Increasing taxes on investment income by taxing investment income at the same rate as ordinary income for those who make over $1 million; and
4. Decreasing the exemption on gift and estate taxes from $11.58 million down to $3.5 to 5 million.
Accordingly, in this article, we will discuss some year-end tax planning questions that you would do well to explore as the 2020 tax year comes to a close. If, after reading this article, you would like to discuss your own tax situation, we invite you to call the Florida tax planning law firm, Mary E. King, P.L.
The Law Office of Mary E. King, P.L. can make sure that your tax issues are resolved efficiently and at the lowest cost to you. Please fill out our online contact form, or call us at 941-906-7585 today.
Is this a good time to freshen up my estate plan?
In short, yes. While it is never a bad time to make sure that your current tax plan is current, 2020 has been a year full of changes. The pandemic and the massive economic downturn in the country has forced people to reconsider how to manage finances that may likely have been stretched thin. Plus, the possibility of tax policy changes from the incoming Biden administration indicates that revisiting your tax plan would be wise.
In fact, the uncertainty of what will happen to the current tax law means that now is the time to make some choices. By consulting with a tax planning professional, you can determine where your priorities are, and thus which possible tax policy changes you will want to plan for, and which you might be less worried about.
Finally, year-end is always a good reminder to look at your tax planning to make sure that major life events, like divorce or birth of children, are incorporated into your plan.
Should I try to realize capital gains before the end of the year?
If you are making more than $1 million per year, then you may want to realize your capital gains by selling securities or other assets before year-end. Why? That is because the Biden tax proposal on those making more than $1 million is to tax investment income (capital gains) at the same rate as regular income. Thus, the 20 percent capital gains rate could nearly double to 39.6 percent in 2021.
What that means for you, if you make more than $1 million, is that your capital gains taxes will essentially double if Biden’s proposal becomes law. While there are many reasons to hold on to an investment, regardless of the tax liability, realizing capital gains before the end of 2020 is worth considering for high-income earners.
Is it worthwhile to defer deductions until next year?
There is some talk that the Biden administration may want to repeal the 2017 law that put a $10,000 cap on itemized deductions for state and local income property taxes, which hit high-property-tax states like New York, New Jersey, and California very hard. So, if you can defer a property tax bill until 2021, that may be worthwhile given the chance that your deduction will increase.
With charitable contributions, you will want to consult with a tax professional to see which is the best way to go. On the one hand, the CARES Act, which will sunset at the end of 2020, allows you to take a deduction of 100 percent of your adjusted gross income. In normal years, that deduction is only 60 percent of your adjusted gross. Thus, it may make sense to make any large gifts to charity now, and benefit from that deduction.
On the other hand, if the Biden administration brings in higher tax liability for you, then it may be better to wait until 2021 so you can use the charitable gift deduction to offset those higher taxes you will be facing.
In short, consulting with an experienced tax planning law firm would help you make these year-end decisions.
Consult with a Florida Tax Planning Law Firm Today and Get the Help You Need
Having a Florida tax planning law firm at your side to advise you on options and strategies for responding to the IRS is worth its weight in gold.
Consider reaching out to the Law Offices of Mary E. King to help. Tax matters can be complicated, and thus, it is always helpful to have someone in your corner who understands the tax law and deals with the IRS on a regular basis. Indeed, beyond just the stimulus payment from the IRS, there could be other issues with which a seasoned tax attorney can help.
So, when it comes to dealing with tax relief and tax litigation, you need to talk to a Florida tax planning attorney who can help. Mary E. King has spent her career concentrating in tax law and can help you with tax scams in Florida and elsewhere. Attorney King has a wealth of information about what types of options would make the most sense for you and your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax lawyer of Florida, is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience as a tax lawyer in Florida for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585. Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.