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As the Trump administration prepares to trade control of the White House and half of Congress to the Biden administration, tax partners say it’s only natural for people to have new concerns about their future tax planning. Fortunately, financial advisers are also willing to offer advice.

Both Brett Neate, a partner at CPA and management consulting firm Zinner & Co. in Beachwood, and Jennifer Gajda, a principal at the Cleveland-based consulting firm Rea & Associates, said the most common fear they hear from clients during an administration change is one of the unknown.

“Things change every four to eight years and you have to know when to either kick the tax can down the road, waiting for what you think is a more favorable change, or to accelerate something, whether you’re accelerating income because it’s going to disappear or pushing off deductions,” Neate said.

With the Biden administration expressing interest in increasing tax rates for higher-earning taxpayers, Gajda said it currently makes the most sense for people who earn an annual income of $400,000 a year or more to start hedging their bets.

“A big one for high earners,” Neate explained, “especially people with large portfolios, is a proposal to increase the tax on capital gains and qualified dividends. People in lower tax brackets can go from 0% up to 20%, and they’re talking about taxing that as if it was just regular income, which can be as high as 39.6%. So it can be a jump from 15 or 20% to more than double.”

Gajda said that some clients have expressed concern over the incoming administration’s proposition to reduce the cap on estate tax exemptions from $11.5 million to $3.5 million.

“That puts a lot more people into being subject to estate tax zone,” she said. “Under the last four years with this high exemption, the state tax was wasn’t as concerning for a lot of people because (they) were not over that $11.5 million. But now I think a lot more people will have to take a look at that if the change happens, and that’s a big if.”

Both Gajda and Neate were also quick to point out that, as of now, these changes have only been proposed and, with the House and Senate currently stratified between Democrats and the GOP, they might not even come to pass depending on what Congress ends up doing. Either way, it could be more than a year before any of them come to pass.

“I think there’s a lot of prospective tax changes they’re going to talk about that may not happen until 2022, and maybe not even until further out because of the midterms in 2022,” Neate offered. “I don’t think anything significant other that corporate taxes, maybe the estate tax, may-be some minor adjustments (will occur) in the 2021 tax period.”

With that in mind, Gajda said that predicting the movement of tax legislature isn’t an exact science, but it’s a field that concerns everyone.

“I think everyone can be affected by possible tax policy changes that may be coming, but it’s often just kind of a waiting game to see where it’s going to fall because there’s a lot involved in the process of changing the tax law,” she said. “I think we are definitely going to be seeing significant changes in the future.”


Collin Cunningham is a freelance writer from Cleveland.

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