Most of us can’t wait for this nasty year to come to a close. As we look ahead to the New Year, however, it is important to remember that, given the results of the 2020 election, the Tax Cuts and Job Act of 2017 enacted by the Trump Administration will likely expire. This year, 2020, could be your final opportunity to take advantage of historic gifting exemptions and tax rates. This is a two-part blog on the matter.
President-Elect Joe Biden has announced plans to undo some of the tax regulations introduced by the Trump Administration in the Tax Cuts and Job Acts of 2017. Of course, this depends on the cooperation of the Congress; however, it's crucial to be prepared. Some of the key points in Joe Biden’s proposed tax policy are the following:
- An increase in the corporate tax rate from 21% to 28% for business income and a 15% minimum tax rate on company earnings as well.
- An increase to 21% for the corporate tax rate for foreign subsidiaries of U.S. firms.
- An increase in the current tax rate for individual income from 37% to 39.6% at the $400,000 level.
- Dividend and capital gains income to be taxed at the same rate as ordinary income rate for income above $1 million.
A large amount of these taxes will come from wealthy individuals and businesses, especially those that hold capital gains on their investments. This could have a significant impact on your wealth as an individual or business. Those with a taxable income higher than $400,000 could see their income tax increase significantly, along with city and state taxes and the proposed escalation of the gift and estate tax.
With this in mind, it is time to act quickly before the end of the year, to plan for a higher tax rate and new policies that could significantly affect your wealth.
Part 2 to follow...