TAX PLANNING NO MATTER WHO WON
We have uncertainty in the air with who is going to be president- depending if you’re asking the Republicans or the Democrats, they will both tell you, their candidate is going in. Nevertheless, while we’re in this state of influx, trying to get things sorted out on both sides, there are some things that you need to consider to do before year end.
Revise Your Will
Right now would be a good time to revise your will because if no other law goes into effect, then there’s an expiration of a lifetime credit, that will happen in 2025. The current estate tax exemption is $15,000. for individuals, meaning that your gift tax every year, you can give $15,000 to an individual and they do not have to make that as a reportable gift tax upon filing a gift tax return. The current estate tax exemption is $11,580,000. That means that you can move up to $11,580,000 over your lifetime over to other individuals and not incur any gift tax. If you’re married, you can transfer $11,580,000 out of your half of the estate and your spouse can transfer $11,580,000 well. In the year 2025 all that goes away. So now’s a good time to revisit to see if there are some things that you should be doing by setting up some trusts or gifting to take advantage of these lifetime exemptions before they expire.
The Cares Act Tax Incentives
One of the other things that is going away unless a new tax law is passed is that all of the tax incentives from The Cares Act are set to expire in the year 2021. So all of the five year loss carry backs being able to offset all ordinary losses against capital gain income will expire next year. So taking that into consideration, if you are still suffering substantially from the pandemic and you have the ability to sell some capital gains or cash in on the gains, this would be the years to do it because you’ll be able to shelter the capital gain against your ordinary losses. Next year, unless the law changes, you will only be able to offset up to $250,000 loss against capital gains.
Talk to your tax advisor about that, see what else you can do. But the bottom line is first, this is a good year to revise your will or consider making some gifting. And second, make sure that you’re focused in on what do I do before the end of the year to make sure you are taking full advantage of your tax situation.
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