Each new presidential administration brings anticipation of potential legislation changes. As we approach President-elect Biden’s inauguration, this year is no different. From a financial planning perspective, potential changes relating to taxation are high on the “watch list”. While we must remain attentive, it’s also important to note that past tax law changes have allowed time for planning prior to implementation. Financial plan changes may be appropriate expeditiously following the passing of any law, but we expect there will be time to make adjustments prior to implementation of changes.
Based on information available from President-elect Biden’s tax proposal, we are paying particularly close attention to the following:
- Proposed Changes for Individual Income Taxes
- Higher taxation on earned income above $400,000 per year as well as limited itemized deductions
- Less favorable long-term capital gain tax rates for those with income above $1,000,000 per year
- Proposed Changes for Estate Planning
- Reduced estate tax exemption from $11.7 million to $3.5 million
- Top estate tax rate increased from 40% to 45%
- Loss of step-up in basis upon death, which would cause a taxable event for brokerage accounts at death
For clients for whom we provide financial planning in addition to investment management, we are reviewing components of their financial plan that may be impacted by new legislation. If you would like to learn more about our financial planning services or have questions about your personal plan, don’t hesitate to reach out to us.