As we continue to make our way through 2021, it is important to be aware of some potential upcoming changes that could impact your taxes and overall returns in the long run. To this point, the new administration and Congress have been focused on additional stimulus and spending. Now they reportedly are turning their attention to some potential tax changes. Some will apply to everyone, while some will only apply to those earning over certain thresholds.
We do not have specific details of what the proposed changes will look like, but we are starting to get some ideas based on recent comments. One area of likely change is the income tax rate, which could be increased for high earners. We also could see a change with capital gains taxes. Currently, long-term capital gains are taxed at a lower rate, but there is talk of starting to tax them at ordinary income tax rates (which often are higher). A final change to note is regarding estate taxes and the exemption amount. Congress may significantly lower the exemption amount, which would increase the number of taxable estates, and also raise the estate tax rate. These are some important items to monitor, and should these changes come to fruition, some considerable tax and estate planning could be necessary.