The New Administration’s Tax Proposal
We knew it was coming. Some of it’s good and some of it’s bad, depending on your perspective.
Let me emphasize that this is only a proposal. Many look at it as a guide book for where the administration’s head is when it comes to what it will approve or disapprove. There are still several months of arm-twisting that will happen between the two parties and the two houses before anything will come to a vote.
But the starting point is rather interesting.
Qualified Business Income Deduction Retained
I was excited and bewildered to see that the 20% reduction of income for certain businesses is included in the President’s budget. Given the new administration’s need to not raise taxes on the middle class, I guess this isn’t that surprising.
I would be quite surprised if there weren’t some changes to this when the final budget proposal comes out, given the left wing slant so prevalent in today’s politics. We’ll see.
Capital Gains Tax Increase For The Wealthy
These taxes on a Married Filing Joint return with over $1M in income would increase from 23.8% to 43.4%. This is a combination of the additional Obama Era 3.8% Medicare Tax and an increased cap gains tax.
This wasn’t a surprise given the fact that they’ve been floating this idea for some time. The surprise came with the implementation date.
The proposal sets an implementation date for late April. That’s not April 2022, but rather April 2021. That doesn’t even give high-income taxpayers a chance to adjust their portfolios before the tax increase.
There will be more to follow on this developing story.
Let me leave you with this.
If we haven’t already begun tax planning for this year, the time to start is now. This will be another difficult tax planning season, given the instability in earnings, and the increased volatility of tax law.
It will be difficult to plan because many have experienced a see-saw effect in their earnings. 2019 was up, 2020 was down, and 2021 will be up again. That will mean that, for many, the estimated tax deposits that came with your 2020 income tax returns may need to be adjusted.
We’re also looking at a new set of tax laws based upon the new administration’s priorities. This part is uncertain at best, but still needs to be discussed.
Either way, if you would like to do some tax planning, please contact our offices today.
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. If there is anything you need, whether you are a current client or not, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
www.AccountingSolutionsLtd.com
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