With the political changeover, the biggest question we have been hearing is, what do you expect to happen, especially tax wise?
People are particularly concerned with whether their tax rates will suddenly increase.
Given the current makeup of the national government, we are not expecting crazy wholesale changes. There is too narrow of a majority to think Democratic party will do anything huge.
Incremental changes should be coming, but these will not be effective for 2021. In order for tax changes to occur, a tax bill would need to be passed, and this can only be done once a year. It will take some time to enact changes. Also, historically Congress has been hesitant to pass unfavorable tax changes for a year after that year has already started.
What’s Coming Beyond 2021
So, this year not much will change when it comes to taxes, but after 2021, I’m willing to bet on the following:
Incremental tax rate increases in higher brackets and for C corporations
The capital gains rate will go up some
Repeal of the $10,000 cap on state and local income and real estate taxes
On that last point, a big thing the Democrats disliked was the 10k limitation on state and income taxes and property taxes. In Texas, it’s been a big deal. Most people who own a residence in a nice neighborhood were capping out on the 10k deduction, so it was tough to itemize unless they made major charitable contributions.
This will change and a big swath of taxpayers will need to get back into planning for itemized deductions.
Come in and see us to make some decisions for this tax year and get a great tax plan together.