Published Friday, November 13, 2020 at: 7:01 PM EST
The precise tax hikes coming in 2021 are unclear. Nonetheless, proactive tax planning is urgent for high-net worth individuals and high-income earners.
Year-end tax planning is normally a routine affair, but 2020 is a year-end tax planning season like no other. The stakes are high for certain individuals.
In an era of expanded Presidential authority, some tax hikes could be implemented in a Biden Administration with executive order. While Congress is given the power of the purse in the Constitution, the Biden Administration will be under pressure to raise revenue.
The U.S. balance sheet was unexpectedly weakened in 2020 by an explosion in the federal deficit to pay for $2.2 trillion in Covid relief to individuals and businesses. Another relief package is widely expected by the end of February 2021 to further erode the nation's financial condition.
The current estate tax exemption of $11.58 million for individuals ($23 million per married couple) would be lowered to $3.5 million ($7 million for a couple) under President-Elect Biden's tax plan. Earning more than $400,000 in income could be subject to federal payroll tax of 12.4%. There's about a 25% chance of sweeping tax hikes in 2021.
The Standard & Poor's 500 stock index closed Friday at 3,585.15, surging +1.36% from Thursday, +2.13% from a week ago, and +46.29% from its March 23rd bear market low.
The index closed at a new all-time high, breaking the previous all-time high set in early-September.
Stock prices have swung wildly since the coronavirus crisis started in February and volatility is expected in the months ahead.
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