Tom, Should We Be Planning to Pay More Taxes Under the Biden Administration?
Transcript:
Katie Nealis: So we have another question from the question bank, do I need to make any moves because of the possibility of tax increases under this administration?
Tom Vaughan: Yeah. So there are two pieces that are being talked about for individuals. There, there’s several pieces that are talking about tax increases to corporations, that could impact your investments. So there, you know, you want to be looking at how that’s going to happen, and what you might do around that, which industries are going to be more impacted by those increased taxations. And which ones aren’t.
But the two parts that are that they’re talking about so far. And again, this is just talking left to see what actually happens. Number one is increasing the tax rate for those above 400,000. So far, it sounds like they’re talking about just households. So a couple is going to kind of take a penalty here, because there’s more chance of two of your working that you might be over 400,000, then a single person would as a single filer, but they’re talking about increasing the top rate back to 39.7%. And right now, the top rate is 37%. So anyway, that that that could have an impact. And I’ll talk about what you might want to do there.
But the other impact is even more interesting. And that is that they’re talking about increasing capital gains rates, up to ordinary income if your incomes over a million dollars. So right now, the top tab, capital gains rate is 20%. That top rate that you would be at an ordinary income, if you had more than a million dollars, it’d be 39.7%. So it’s almost a doubling of the taxation on capital gains. And so the biggest thing I can see there, because I don’t have a lot of clients that are making over a million dollars a year per se, but I do have clients that sell homes here and move to other places. And so I do think that’s where I’ve seen people that have more than a million dollars worth of gains, we’ve had tremendous growth in property values here. So it’ll be really interesting to see how that plays out.
I suspect that if they pass this and say it’s going to start in 2022, we’ll see a lot of people selling their homes in 2021. And, you know, if they were going to move to you know, Arizona three years from now, they might do it now. So you know, we’ll have to see how that plays out. So that’s one thing to look at is if you have you know, enough capital gains in your home, what you might do in terms of dealing with, you know, that gain in terms of the income over 400,000. And going up, it’s not going up that much. I’m not sure it’s that detrimental per se. You know, we’ll have to see, but it might impact SEO or Roth conversion concept in terms of trying to keep your conversions underneath that tax bracket, etc. So, you know, again, we’ll have to wait and see what actually happens as far as that goes. And that that’s being you know, worked