Though Election Day is over, we still have incredible uncertainty as to what 2021 will bring. If Joe Biden takes control of the White House, one of the many outcomes may be a substantial change to the current gift and estate tax laws.
A Biden presidency and a Democrat-controlled Senate would mean this tax platform could become effective as soon as January 1, 2021. Taxpayers who may have taxable estates should consider additional year-end gifts to take advantage of the existing $11.58 million exclusion. Furthermore, since Mr. Biden plans to eliminate basis step-up at death and remove capital gains tax for high-income earners, some taxpayers may consider selling highly appreciated assets by the end of the year to take advantage of the current 20% capital gains tax rate.
Lastly, as you finalize your year-end planning, note the changes the CARES Act had on charitable contributions in 2020. The CARES Act allows individuals to deduct 100% of their charitable gifts against adjusted gross income during 2020. In 2021, charitable contributions will be limited to 60% of adjusted gross income, making 2020 advantageous to donate.
There is certainly not a “one-size-fits-all” approach to estate planning. To help you navigate these changes’ potential impact, a member of our team will reach out to discuss your options with you. To be clear, no action may be the best decision for you. Nonetheless, we want to ensure you understand the impact of a possible estate tax overhaul.
Tom Landers is a Tax Professional with ATKG and a Certified Public Accountant. He graduated from Southern Methodist University with a bachelor’s in business administration. He was a recipient of the Hunt Leadership Scholarship – an award given annually to approximately twenty students from across the United States. Tom received his Master of Science in Accounting with a concentration in Tax. Before joining ATKG in 2020, he worked for a Big Four firm for nearly two years.