The Proposed Biden Tax Plan - AICPA Engage - Jul 26 2021

Tax Planning For A Biden

Administration: The Proposed

Biden Tax Plan

7.26.2021| AICPA ENGAGE

Jeffrey Levine

CPA/PFS, CFP ?, CWS ?, AIF ?, BFA, MSA Advisor. Chief Planning Officer, Buckingham Wealth Partners Blogger. Lead Financial Planning Nerd, Nerd's Eye View, Educator. Creator, Program Leader, Savvy IRA Planning? Tweeter. @CPAPlanner, CPAPlanner

? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

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WHERE DO WE STAND?

? 2018 Michael Kitces |

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Election Recap

? Office of the President ? Democrat-controlled

? U.S. House of Representatives ? Democrat-controlled

? U.S. Senate ? Current status 50R : 50D+I ? Vice President casts deciding vote in cases of a tie

? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

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Proposed New Top Ordinary Income Tax Rate

? Pledge not to raise rates for those making less than $400k ? Effective after December 31, 2021

? Increase top marginal rate to 39.6% when taxable income* is above: ? Married-Joint: $509,300 ? Head-of-Household: $481,000 ? Single Filers: $452,700 ? Married-Separate: $254,650

? Increase in current top tax rate from 2.6% to as much as 7.6%

*Tax brackets would index for inflation after the 2022 tax year

? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

@CPAPlanner

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Proposed New Top Ordinary Income Tax Rate

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? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

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Should Clients Accelerate Income?*

? Income below $400k ? No obvious need to accelerate income

? Already in highest bracket and likely to remain there in the future ? Most obvious candidate for income acceleration

? Income above $400k, but not in highest bracket ? High risk, high reward ? "Do you feel lucky, punk?"

*If it gets late in the year, and new taxation is looming

? 2018 Michael Kitces |

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Strategies To Accelerate Income

? Roth conversions

? Business owners ? Accelerate billing ? Delay paying expenses ? Avoid accelerated depreciation

? Work with employers to accelerate payments?

? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

@CPAPlanner

Proposed Changes to Pass-through Businesses

? Pass-through business income above $400k would be subject to 3.8% NIIT or SECA Tax ? Based on Adjusted Gross Income (AGI) ? Excludes income already subject to employment taxes ? Active/material participation

? $400k AGI threshold not indexed for inflation

? Effective after December 31, 2021

? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

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QBI Deduction Changes

? Proposed elimination of the deduction for business owners with income >$400k ? Minimal impact to Specified Service Trade or Business (SSTBs) owners ? Potentially substantial impact to non-Specified Service Trade or Business owners

? Depends on allocable share of W-2 wages and depreciable property ? Potentially increases the benefits of accelerating business income

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? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

Proposed Changes To Itemized Deductions

? Cap the maximum benefit of itemized deductions at 28% ? Repeal the SALT cap*

*Not part of the Biden platform, but likely included in any Democrat-backed piece of tax legislation

? 2018 Michael Kitces |

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Handouts/Additional Materials at: ENGAGE7

@CPAPlanner

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