Dems Win the Blue Wave - What's Next for Taxes?

Transcript

It is January 6, 2021, in the morning and we just had the Georgia runoff for the senate races last night or yesterday. The various media outfits are calling the elections for the democrats on both races. This means that we are looking at a democrat-controlled house, a democrat-controlled senate, and a democrat-controlled presidency which means that the things that Biden has talked about with regards to taxes have a much higher chance of happening.

Some of the highlights to consider is that one top rate is expected to go up to 39 percent up from 37 now and the corporate rates discussed raising those from 21 to 28 percent. They've discussed getting rid of 1031 exchanges. That is when you have real estate and you want to sell one piece of real estate and buy another piece of real estate for investment purposes. Then, you just defer any gain until you exit that whole process. This will talk about getting rid of that.

They've talked about the capital gains exclusions. One of Biden’s proposals is that if you make a million dollars in a year then your long-term capital gains become taxable at your ordinary rates which would be that 39 rates plus you have Obamacare taxes of about three percent plus you have whatever state taxes depending on where you live. That is an enormous tax increase for those people who are selling, whether it be stocks or bonds or their own small business.

A lot of people have a small business and exiting through a sale to an acquirer is kind of the plan. So, now we're looking at potentially much higher rates more than double of the rates that we're paying that are being paid currently. None of these is a done deal yet. Still, the elections have to be finalized and everybody has to be sworn in at the end of January and then they have to go ahead and pass some bills and when they do that whether they will apply to 2021 or only going forward to 2022 remains to be seen.

Historically, there have been some things that have been applied to the current year in which a tax bill is passed so these are all things to be aware of and if you want to talk over your options and do some planning. Therefore, give us a call and taxpayer. co we can book a talk and discuss your individual situation.

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