Opinions abound about the upcoming presidential election. However, there’s one subject on which people from both sides of the aisle agree: tax rates are likely to increase in the coming months. According to PricewaterhouseCoopers’ Road to Election 2020 Pulse Survey, a majority of CFOs and C-suite executives believe that corporate tax rates will go up no matter who wins in November. Of the 578 individuals polled, 70 percent said that business taxes would likely increase to fund COVID-19 relief, while 63 percent anticipated trade restrictions between China and the U.S. impacting the economy. The result is that many individuals and companies alike are making financial planning a priority. Read on to learn more about how the presidential election could impact your tax bill in the coming months. How to Prepare for a Possible Tax Hike From adjusting your retirement plan to conducting a stock option analysis, there are various steps you can take to prepare for 2021’s likely tax hike. Check out these tips for successful financial planning in these uncertain times: Make Smart Choices About Your Estate Biden’s tax proposal calls for taxing unrealized capital gains at the time of death. As a result, families may want to make different choices now when it comes to their estate planning. To avoid forcing beneficiaries to pay taxes on your estate, consider using gifting strategies to pass on property to children and grandchildren. You can also set up a trust for your assets and appoint a trustee to manage it. Look Out for Your Investments Another component of the Biden tax proposal involves increasing the rate for those selling investments. Moving forward, long-term capital gains and qualified dividends may be taxed at 39.6%, just like ordinary income for top earners. Note that this rate applies when individuals sell investments they’ve held for a year or more. There are various strategies available to mitigate such a proposal; however circumstances may vary from person to person. Investors may be compelled to sell appreciated investments and take advantage of current long term capital gains rates and reset their cost basis, paying the lower income tax rate now instead of a higher one later. Since there’s no guarantee that the proposal makes it through legislation, the consequence of a potential tax bill would be a reality. One should review the tax diversification of their portfolio today to strike a balance between taxable and tax free investments. This will help them weather not only the tax policies of the current day but that of future tax policies as well. A discussion with a local CERTIFIED FINANCIAL PLANNER® can help you analyze your current situation and may be able to provide tax diversification strategies for your unique situation. Consider a Like-Kind Exchange To avoid and defer capital gains taxes on the sale of investment property, individuals often opt to conduct a like-kind exchange. With this strategy, taxpayers invest the proceeds of a sale into a replacement property of an equal or higher value within 180 days. While the Biden tax plan doesn’t say with certainty that like-kind exchanges will be repealed, it does suggest that the provision may be eliminated to fund initiatives related to child care and elderly services. Individuals looking to purchase a new investment property in the coming months may want to take advantage of this option while it’s still available. Make Financial Planning a Priority Concentrum Wealth Management provides a wide array of financial planning services for individuals and businesses alike. We’re passionate about building personal relationships with every client who walks through our doors. Utilizing a strategic approach to investment management, we help you protect your wealth and achieve your goals.
To learn more about our services, call today at (408) 840-4030, or contact our advisors online.