.png?width=191&name=mgalogofinal-01%20(3).png)
Did you miss our recent blog post, Here’s What’s Ahead: Highlights of Biden’s Tax Policy Proposals? If so, we encourage you to check it out first before diving into this article. We cover the top three themes of the Democratic Party’s tax plan so you can be prepared for the potential and likely changes ahead.
As we prepare for the strong possibility of new tax legislation to be passed within the next 24 months, it’s essential to understand the tax policy proposals out there, especially those impacting high-net-worth and high-income individuals and businesses, all of which will see increased taxes.
Once you understand the general themes, it’s time to start planning right now. Although the chance of Congress enacting any tax law changes with a retroactive date is low, it still could happen. That’s why we suggest you start planning for these potential new tax laws today — it’s always better to be proactive than reactive.
Here are some planning ideas to consider in anticipation of Biden’s tax plans.
5 Ways to Prepare for Potential Higher Taxes Under President Biden
1. Spread out or defer your taxable income. This could help you to stay under the proposed new thresholds for higher tax rates. As an example, you could use 1031 like-kind exchanges or invest in Opportunity Zones.
2. Time your deductions carefully. If income tax rates increase or certain limitations are put into place, this could ensure that you get the most out of your deductions. Think about things like deferring business-related expenses or accelerating vs. deferring itemized deductions.
3. Preserve accessibility when making gifts. Be prepared for anything! If laws or circumstances change and you need / want access to the gifted money or property, make sure you have that option. You could do this by using Spousal Lifetime Access Trusts (SLATs) or Special Power of Appointment Trusts (SPATs), for example.4. Preserve flexibility when it comes to your estate. As mentioned in point #3, we want to reiterate that you should be prepared for anything. Preserving flexibility will allow you to act quickly in the instance of a retroactive tax law change. You could use a “QTIP-able” trust or make formula gifts, for example.
5. Take advantage of estate planning techniques. Some common planning tools may become limited or unavailable in the future. Therefore, it’s best to use them now. Think about things like irrevocable grantor trusts or valuation discounts with family-controlled entities.Let Us Help You Make the Complex Simple
As always, your team at MGA is here to keep you updated with the constantly evolving tax laws, especially with the recent change in political power. We want to make sure you are equipped to make informed decisions regarding your personal and business planning.
If you have any questions or would like to discuss any of these planning ideas further — let’s talk!
