Here are some ways to prepare for Biden’s tax increases:
- Accelerate 2022 income into 2021 to avail of lower tax rates in 2021.
- Defer 2021 deductions into 2022 when you need it more to counter higher rates in 2022.
- Sell long-term capital gain assets in 2021to take advantage of lower rates.
- Realize capital gains on highly appreciated assets during your lifetime.
- If the step-up in cost basis is eliminated, taking gains while you are living and paying taxes on the gain will reduce your estate and the amount of estate taxes due while limiting the tax burden on beneficiaries.
- Step up gifting. Make significant gifts in 2021 to take full advantage of the current expanded unified gift/estate tax exemption amount and reduce the size of your estate.
- Accelerate establishment of grantor trusts. Under current proposals, grantor trusts in effect prior to the enactment of legislation will be “grandfathered” in.
- Work with trusted CPA, lawyer, and financial advisors to determine if grantor trusts are appropriate for your circumstances and should be established before tax laws change.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].