Possible Changes To Your Taxes & What You Can Do About It….and Lessons From A Marathon – Finger Financial Five #29

“A tree that is unbending, is easily broken.” – Lao Tzu

     I signed up for the Myrtle Beach Marathon a while back.  Due to injury, I was not able to train as I needed. A group of friends asked me just to start with them.  One member of the group had a lung disease that nearly took his life.  He committed to run the half marathon.  This was an amazing feat because he had the breathing capacity of less than one lung. It took him 2 hours to walk 2 miles not long ago.  What an inspiration. We all walked/ran with him.  It was a beautiful day.  Great conversation.  I did the half with him and the rest did the full marathon.  I felt pretty good considering.  Few things to note:

  • Does not matter how long it takes to get somewhere if you enjoy the company.  Retirement tip: Life does not begin at retirement. It begins each day.  Enjoy it or work to change it.   What do you enjoy the most?  What can you do to experience more of that, while planning for retirement, as well?

  • Small steps over time lead to great distances.  Running a half marathon was pretty scary for me. It was so much distance and so little training.  I did not have to run 13.1 miles.  I can walk too.  Just keep stepping in the right direction.  Retirement tip:  Small saving leads to HUGE amounts over time.  The toughest part is starting, just as the toughest step for me was the first one.  Click here to learn more.

  • As we hit Ocean Boulevard, we passed EMS giving CPR to someone laid out on the road.  I don’t know if he survived or not.  We do not know when we will come to the end of our own road.  Plan to live a long time but remember to enjoy each day.  Retirement tip:  Get your estate plan in order.  You don’t know when you will go.  It can be a nightmare for the survivors.

  • South of Ocean Boulevard there are a few hotels that still have “Color TV” on their signs.  I don’t think that is the main attraction for their rooms this day and age.  Retirement tip: Things change.  What worked 50 years ago, wont work today.  Sometimes what worked yesterday, will not work today.  You must be flexible and change with the times.

10 Possible Changes to Individual Taxes from Biden’s Tax Proposal and What You Can Do About It

1. Increase the top ordinary income tax rate for income over $400,000 (unclear whether for families or on individuals).  Tax Planning Tip: use every resource to bring your income down like, funding retirement plans, lumping charitable contributions in one tax year, giving money directly to charity from an IRA aka Qualified Charitable Distribution (if over 70.5), Donar Advised Fund, increase municipal bond holdings (taxes go up the after tax yield goes up), or put income producing investments in tax friendly accounts like Tradional and Roth IRAs.

2. Eliminate step-up in basis at death.  Tax Planning Tip: Do “cost basis management”.  Give low basis stock to low-income family members, donate stock to charity, or do strategic tax rebalancing, just to name a few.

3. Increase long-term capital gains rates on income $1,000,000 and over from 20% to 39.6%. Tax Planning Tip:Consider taking gains before the change.

4. Unified gift and estate tax exemption amounts would decrease from $11.58M to $3.5M for individuals and $23.16M to $7M for married couples. Tax Planning Tip: If you are in this financial realm, DO ESTATE PLANNING AND GIFTING NOW!!!! !  There are no claw backs so use it or lose it.  BUT if this is NOT passed, your gifting might not be able to be undone.  Be careful and get good advice.

5. Replace deductions for contributions to IRAs, 401(k)s, and similar retirement accounts with a flat 26% credit. Tax Planning Tip: This would make ROTH IRA contributions more attractive for higher income earners and for lower income earners a Tradional IRA may be best.

6. The maximum amount of itemized deductions would be no more than 28% for those earning over $400,000.

7. The earned income tax credit would be expanded for certain workers 65 or older.

8. The Child and Dependent Care Tax Credit would be increased to $8,000 ($16,000 for multiple dependents) and increase the maximum reimbursement rate from 35% to 50%. The Child Tax Credit temporarily increases from $2,000 to $3,000 per child ($3,600 for children 5 years old and younger) for the 2021 tax year. Tax Planning Tip: Consider possible different filing options to see which is most beneficial.

9. The first-time homebuyer credit would be restored with a maximum of $15,000. Under the current rules, there is no first-time homebuyer credit.

10. Tax-deferred exchanges for real estate performed under IRC 1031 would no longer be available with the proposal. Tax Planning Tip: Do like kind exchanges this year, but double check to make sure the property you are considering qualifies.

What to do now? Work with people who are on top of the changing options and how they will affect you specifically.  It is important to have your financial advisor work with your CPA and estate attorney.  Together they can be a formattable team to navigate tax landscape.

Feel free to call me with any questions.  Click here to setup a phone appointment.

On the lighter side, Myrtle Beach High School Tennis Team won the first round of playoffs this week. Elliott played #2 singles and won. Next match is the quarterfinals.  It has been two years since the magical State Championship.  Wish us luck!!!

Hope all is well with you and your family,

Jeremy Finger, CFP®, CIMA®, CRPC®, CPFA

Founder & CEO
Wealth Management Advisor

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.

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Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.


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