With the House in Republican control and the Senate remaining in Democratic control, one thing is certain. Almost nothing will get done in Washington in the next three years.
This certainly isn’t a good thing. We all need a functioning Federal Government.
But if nothing is going to get done, this could be a period of stability in tax law that no one was expecting. The predictability of this three year period could potentially be used as a planning opportunity.
Roth IRA Conversions
It might be a good time to convert your regular IRA to a Roth. In doing so, you would pay the tax up front, but it could be spread over the next three years.
This would mean that when you get distributions on that money, the taxes will already be paid. Given the historically low income tax brackets we currently enjoy, this could be something to consider.
Harvesting Capital Gains
If you have a stock that has appreciated substantially in value, that has already seen it’s best days, you might think about selling it now. Cap Gains for many taxpayers is only 0% to 15% at the Federal Level given your overall Adjusted Gross Income.
Strategically spreading those gains over the next three years might be a way of reducing your tax bill in the future.
Bunching Charitable Deductions
If you’re a taxpayer who normally doesn’t itemize who also donates $10K annually to charities, bunching those contributions into one year might help. That way you could itemize the first year with a larger deduction and just do the standard deductions for the next two. This would increase your overall deductions for the three years.
Let me leave you with this.
Economic news from around the world continues to worsen.
Inflation in Great Britain just hit 11.1% in October. This was up from 10.1% in September.
Britain’s new economic minister has just unveiled a plan that substantially increases taxes and reduces spending in the coming years. The U.K. is the first nation to reverse its pandemic spending in an attempt to calm inflation and deal with their recession.
Germany, long considered one of the most stable economies in Central Europe, had an inflation rate last month of 10.4%. This was up from 10.0% in September. Many are speculating that their economy might run at a deficit this year, for the first time in almost a decade.
Thousands recently took to the streets to protest their difficulties with inflation in Paris and across France. The marches stopped large portions of public transportation and put further pressure on President Macron’s Administration.
In my conversations with customers, no matter what their political leanings happen to be, most Entrepreneurs are simply fed up with our current situation. Being the smarty pants I was born to be, I’ll normally ask a question like, “And where are you going to go?”
So, let me ask you the same question. “Where are you going to go?”
I’ve traveled most of the developed world, and can tell you without hesitation or reservation that we have it much better than anywhere else I’ve ever seen.
A few years ago, I was on a boat doing a Nile cruise. One of the sailors was wearing a Chicago Bulls Jersey.
Through an interpreter I said that we were from Chicago. The sailor’s face lit up as he smiled through a toothless grin saying, “Michael Jordan, Chicago Bulls!”
He did that while displaying a thumbs up. That was the only time I saw him smile that entire week.
Even though Paris’ central district has become a nightmare of overcrowding, whenever there, you need to stroll the Champs Elysee. As you walk, do you see Chanel, Yves Saint Laurent, or Christian Dior?
No. Parisians wear Levis and Polo Shirts. The last time I was there, I saw a middle-aged guy with one of those cute little French moustaches wearing a ten gallon hat. It was surreal.
A couple of years before that we were in Rome. After dinner, Romans like to wander the neighborhoods trying to walk off all of that pasta.
Do you see Prada, Armani, or Versache? No. You see Italians wearing American designers because that’s what’s cool in Italy.
It seems as if the only people who don’t love America are Americans.
Wherever you go, the second you say that you’re an American, people are enthralled. They want to know everything; where you live, what you do, how you live, the questions are almost endless.
Once the questions subside, invariably they all say the same thing which is that they want to come here. My point is to not get caught up in the hysteria.
The popular media have a stake in the insanity. The crazier they can make you, the more you’ll watch their channel rather than a competitor’s.
But the madness and agitation is good for their business, not your’s.
Even in its current state, we live in the greatest nation on the planet. Take a moment and be proud of who you are and the nation you call home.
This truly is the Land of the Free, and the Home of the Brave. And no matter how you look at it, 8% inflation is better than 11%.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions LTd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due DIligence, Payroll Services, or Accounting and Tax Work. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
www.SalarySolutions.net
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.