Tax Planning In November 2020

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https://groco.com/article/tax-planning-in-november-2020/

TAX PLANNING 2020

Transcript:

Hi, this is Alan Olsen?s American Dreams and I want to spend a few minutes talking about tax planning for 2020. Let?s talk tax. Depending on who gets into office, there will be notable differences in philosophy of the direction things are going. After a year of unprecedented government spending amid the coronavirus pandemic, how revenue for the government will be collected into the future will matter. We?ve already seen several states take on substantial deficits and looking for the federal government to help. But in the event, the federal government doesn?t step in and give assistance, they?re going to have to roll back and look to the population of tax players to make up the difference. Already California has made indications of different ways that they?d raise taxes, one of them would be raising the income tax, however, beyond that they had also indicated that they were going to put a net worth tax on all property- except for real estate because real estate already is subject to property tax- but all the net worth. Governor Gavin Newsom backed off that due to the push back, but nevertheless, it may reemerge in 2021 for balancing the budget. One of the other things that California did recently is they slipped in a utility tax. So they?re taxing internet [communication] providers like Zoom. People that are paying their monthly zoom bills are getting an extra charge due to utility tax. And California will continue to look at different ways that they can raise taxes, but moving back to income tax, federal and state. So what does it all mean? Well, first of all, if we look at what?s currently in place, the President [Trump] would like to keep in place the 2017 income tax cuts that were put into play, reducing the top individual rate from 39.6% down to 37%. Well, those if nothing else is done, those are set to expire in 2025. Biden, on the other hand, plans to return tax rates back to nearly the 40% and eliminate the $10,000. cap on state tax and local deduction. They had the effect of raising taxes on households in the high tax states such as New York and California. [Under Biden?s plan] the other thing is that top earners, people that earn over $400,000 a year, are going to be a target for raising money and carrying the burden of tax. Middle income earners, both candidates say they want to cut taxes on households in the middle brackets, President Trump made a proposal prior to COVID-19 19 that would lower the 22% tax bracket down to 15% for the middle income earners, meanwhile, Biden offers more incentivized tax breaks to encourage retirement savings, childcare spending and first time homebuying. In the world of corporate taxes, Trump is sticking to the reduction made in his 2017 tax law that lowered the corporate tax to 21%. From 35%. Challenger your Joe Biden would like to take that rate and have it be bumped back up to 28%. That would be unfortunate for all the people that revoke their s elections or LLCs to suddenly find that the corporate rate they had experienced at 21% had just been raised substantially and of course, both men offer plans to create incentives for domestic manufacturing. In the world of capital gain tax, this 2020 presidential candidates differ particularly in taxing profits on stock. President Trump would like to drop the current tax rate from 20% on capital gains to 15% and has even considered a temporary capital gain tax holiday. How would that be? A zero tax rate on capital gains. Meanwhile, former Vice President Biden plans to change the existing rules in order to tax free profit says ordinary income, which can potentially lead to a 40% tax on top earners on profits of more than $1 million. So that whole capital gains area is vastly different. And until we really are able to determine who?s going in as president, it will make tax planning very, very difficult through the end of 2020. My advice is to wait and see for right now, the stock market is responding with a lot of volatility right now. But they?ve already the market has already priced in a Biden win. So, for right now, hold on and watch what?s going on. But don?t forget to get the planning in place before year end. If you need that assistance, seek the help of a competent tax advisor to give you direction during this time of volatility and uncertainty. I?m Alan Olsen?s with America Dreams, Thanks for being with us today.

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