28 min
2021 Q&A- The Biden Tax Proposal, RMD’s, Market Outlook, more! The Fiscal Blueprint: Retirement Built Right w/ Financial Coach Jeff Montgomery
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- Investing
EPISODE 46: 2021 Q&A- The Biden Tax Proposal, RMD’s, Market Outlook, more!
2021 is off to a start! It seems like we are picking up right where we left off in 2020. Although we have political turmoil setting the stage for 2021. As of this podcast, the markets are shrugging off all of this drama.
However, I'm sure many of you listening are worried about what the future holds not only for the country but also for your finances.
So on today's show, we're going to go through some common questions that we have been receiving in our office. Hopefully, we can alleviate some of the concerns and put folks’ minds at ease a bit.
Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. So, unless you are a client, I can’t give you advice because I don’t know you. So, think of this as helpful hints and education only. And please before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser, and your financial adviser…………. right? that’s just common sense.
(0:50) Practical Planning Segment:
Welcome to the show, Nicholas Craven, CFP®. Nick tells us a little bit about himself and the process of becoming a CFP® professional, and what it means for the firm.
(3:50) Question #1: Now that the democratic party controls the executive and legislative branches of government, what does the future hold for taxes?
It is true that President Biden has slender majorities in the House and Senate so the slender majorities may limit some dramatic policy changes which require 60 votes, but tax policy is likely to change in some significant ways.
Congress can use some special budget procedures to pass tax hikes without needing 60 Senate votes. It is a process called budget reconciliation and has been used by President Clinton, President Bush, President Obama, and president trump to pass the tax cuts of 2017
(6:00) Likely changes are the following:
increasing the top tax rate on regular income back to 39.6%. It was lowered to 37% with the Trump tax cuts. Secondly, the corporate tax rate will probably go to 28% from the current 21%. Neither of these moves will help the economy grow but it's important to note that the US had a top personal tax rate of 39.6 and a corporate tax rate of 35% from 1993 to 2000 and then again from 2013 to 2017 with no recession during those times The limit on state and local tax deductions may actually increase from the current $10,000 limit to at least the $20,000 limit. This is the popular SALT deduction that was very controversial from the trump tax cuts. So, this could help things a bit. The Biden campaign proposed eliminating the step-up in basis at death for inherited assets. My personal feeling is this is very unlikely to pass. It would be an accounting nightmare. It would force people to sell assets that they may not want to sell just to pay taxes. So, my personal feeling is this is not going to happen. We do however expect the estate tax exemption to fall from the current 11.6 million down to around 6:00 or 7 million as an exemption amount. Another possible change may come in the capital gains tax rate. The current top capital gains tax rate is 20%. Biden has proposed capital gains be taxed at ordinary income rates so for those in the top brackets that would be 39.6% because that would be raised as well. Slender majorities should make this virtually impossible. I would instead look for a tax rate hike to 24% from the current 20% at present. In capital gains The one big proposal that will likely fail is applying the Social Security tax to earned income above 400,000. Changes to Social Security benefits cannot be done through budget reconciliation and raising the tax probably won't have the 60 Senate votes needed to break a filibuster.
(15:00) Also, we have received questions about when these potential tax hikes could take place? S
EPISODE 46: 2021 Q&A- The Biden Tax Proposal, RMD’s, Market Outlook, more!
2021 is off to a start! It seems like we are picking up right where we left off in 2020. Although we have political turmoil setting the stage for 2021. As of this podcast, the markets are shrugging off all of this drama.
However, I'm sure many of you listening are worried about what the future holds not only for the country but also for your finances.
So on today's show, we're going to go through some common questions that we have been receiving in our office. Hopefully, we can alleviate some of the concerns and put folks’ minds at ease a bit.
Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. So, unless you are a client, I can’t give you advice because I don’t know you. So, think of this as helpful hints and education only. And please before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser, and your financial adviser…………. right? that’s just common sense.
(0:50) Practical Planning Segment:
Welcome to the show, Nicholas Craven, CFP®. Nick tells us a little bit about himself and the process of becoming a CFP® professional, and what it means for the firm.
(3:50) Question #1: Now that the democratic party controls the executive and legislative branches of government, what does the future hold for taxes?
It is true that President Biden has slender majorities in the House and Senate so the slender majorities may limit some dramatic policy changes which require 60 votes, but tax policy is likely to change in some significant ways.
Congress can use some special budget procedures to pass tax hikes without needing 60 Senate votes. It is a process called budget reconciliation and has been used by President Clinton, President Bush, President Obama, and president trump to pass the tax cuts of 2017
(6:00) Likely changes are the following:
increasing the top tax rate on regular income back to 39.6%. It was lowered to 37% with the Trump tax cuts. Secondly, the corporate tax rate will probably go to 28% from the current 21%. Neither of these moves will help the economy grow but it's important to note that the US had a top personal tax rate of 39.6 and a corporate tax rate of 35% from 1993 to 2000 and then again from 2013 to 2017 with no recession during those times The limit on state and local tax deductions may actually increase from the current $10,000 limit to at least the $20,000 limit. This is the popular SALT deduction that was very controversial from the trump tax cuts. So, this could help things a bit. The Biden campaign proposed eliminating the step-up in basis at death for inherited assets. My personal feeling is this is very unlikely to pass. It would be an accounting nightmare. It would force people to sell assets that they may not want to sell just to pay taxes. So, my personal feeling is this is not going to happen. We do however expect the estate tax exemption to fall from the current 11.6 million down to around 6:00 or 7 million as an exemption amount. Another possible change may come in the capital gains tax rate. The current top capital gains tax rate is 20%. Biden has proposed capital gains be taxed at ordinary income rates so for those in the top brackets that would be 39.6% because that would be raised as well. Slender majorities should make this virtually impossible. I would instead look for a tax rate hike to 24% from the current 20% at present. In capital gains The one big proposal that will likely fail is applying the Social Security tax to earned income above 400,000. Changes to Social Security benefits cannot be done through budget reconciliation and raising the tax probably won't have the 60 Senate votes needed to break a filibuster.
(15:00) Also, we have received questions about when these potential tax hikes could take place? S
28 min