I’m here to help you understand what could happen next with your taxes. Congress recently released a blueprint of what future tax laws could look like. Here’s what you need to know.

Rather than try to dissect a hundred paragraphs of tax code, I’d like to focus on just three big takeaways from what we know so far:

One: Income and capital gains taxes would increase for folks in the highest tax bracket. That’s any individual earning more than $400,000 a year. Joint filers have a slightly higher limit.  We knew this was coming, so it’s not a big surprise.

Two: Retirement accounts may see new restrictions. Roth conversions would be banned for anyone in that high-income category, and everyone would be prohibited from using a backdoor Roth strategy.  That could make 2023 critical for folks who want to use this strategy to create tax-free income in retirement.

Three: Estate planning may get complicated for folks using “grantor trusts.” But, the good surprise is that the “step-up” in tax basis on death is not going away and the new rule that would trigger capital gains taxes on death is not happening.  If you have complex estate planning arrangements, now is a good time to review and potentially revisit them.

I want to leave you with a few final thoughts:

Laws haven’t changed yet and we still don’t know exactly what could change or when. I expect we’ll know more before the end of the year.

Tax laws change. It’s as inevitable as rain. So, we adapt and move on.

Nearly every law passed is a mixed blessing with some good and bad news.

Taxes are just one piece of the puzzle. Please don’t be anxious.

These changes are not likely to derail your whole financial picture. Especially if you work with a professional and take action where needed.

That’s my job. To stay on top of these changes, understand how they affect you, and help you adapt.

If you have a question about what I’ve discussed or you’d like to chat about what’s going on, please use the form below to send me a message. I’ll respond personally.

Sources:

https://www.cnbc.com/2021/10/04/schumer-aims-to-pass-biden-infrastructure-build-back-better-plans-in-october.html

https://www.schwab.com/resource-center/insights/content/will-taxes-rise-wealthy-what-you-should-know

https://www.foley.com/en/insights/publications/2021/09/democrats-introduce-tax-proposals