Three Strategies to Help Prepare for Looming Tax Increases
We've all heard and read the headlines - tax increases are inevitable. With our rising deficit at the state and federal levels, combined with significant increases in government spending and drops in business revenue from the COVID-19 pandemic, tax hikes are likely, especially for higher earners.
CNBC's Robert Frank highlights three strategies affluent families should consider to ease the impact of the anticipated tax increases. These are strategies that TDC Life has been advocating for many years. While the strategies are not new, their efficacy to implement now is as good as it has ever been.
Maximize your gifts to family and friends this year in case exemptions fall or tax rates increase
Under the current estate and gift tax, individuals can give up to $11.58 million over their lifetime, while couples can double that, up to $23.16 million, without having to pay the 40% gift tax.
Sell assets you intended to sell now which have appreciated over long periods of time
Joe Biden has repeatedly announced his plans to increase the capital gains tax and eliminate the step-up in basis, which allows any appreciation in property value during the owner's lifetime to go untaxed. Owners need to consider whether to pay a top tax rate now of 20%, rather than wait and run the risk of a 39.6% rate proposed by Biden should he take office.
Shift income to 2020 to protect from looming tax increases in 2021
Consider shifting as much income as possible into this year, and consider shifting expenses into next year where possible.