Members of the public wishing to view the City of Indio’s Fiscal Year (FY) 2021-22 adopted budget document can do so on the city’s website on September 1, 2021. Approved unanimously by the City Council on June 16, 2021, the FY 2021-22 budget establishes $187.5 million...
Outlook: What’s Ahead for Taxes & Finances
In addition to being tax and finance experts as one of the region’s oldest and most respected CPA firms, Osborne Rincon monitors what is on the horizon for tax considerations to be mindful of as businesses and individuals prepare for the upcoming tax years. The partners of Osborne Rincon offer the following insights and a look ahead for what we might see in 2021 and beyond:
What May Have a Chance of Being Passed? By: Pedro Rincon
The stimulative measures in President-elect Biden’s plan that ease tax burdens on low- and middle-income families will likely be the most palatable for a Congressional majority to swallow.
Among Biden’s proposals: a temporary increase in the child tax credit, from $2,000 per child up to age 16 to $3,600 per child up to age 6 and $3,000 for children up to age 17; raising the child and dependent-care tax credit from a maximum of $2,100 to $8,000; a new $5,000 credit for informal caregivers; and a tax credit for lower-income 401(k) contributors.
As for timing, any changes will likely be effective in 2022 or 2023, analysts say. While new tax rules can be made effective retroactively as long as they are adjustments to existing rules and not entirely new, the chances are slim that they’ll impact taxpayers this year. COVID will most likely take up most of any time and effort put forward.
What Might Happen with Corporate Taxes? By: Lee Osborne
With every change in the White House there are always new tax laws. There are some indications about what may be coming for businesses under the Biden administration’s direction for corporate taxes.
For 2021 there could be substantial changes. President-elect Joe Biden has some big changes in store, however; if the Republicans maintain control in the Senate, many of the tax law changes as proposed, may not occur. There will be some, but not all those originally proposed by Biden.
From a corporate standpoint, we believe the corporate tax rate will go up from the current rate of 21% to the proposed rate of 28%. There will also be new tax credits for renewable energy and workplace retirement plans. For small business, there is the IRS section 199A deduction – and this may remain in place – but be reduced for those with personal income over $400,000.
Some of the more drastic changes may not occur if the Republicans maintain control in the Senate, but there are some changes that both parties should be able to agree on. Here in 2021, most of the changes may be tied to COVID, and the new tax laws may not take effect until 2022. Regardless of when, be assured that change is coming.
What Could Be Coming for Tax Brackets and Capital Gains? By: Jason Schneider
With any change in administration, there are changes to the tax codes, and with the results of the 2020 election, this will be no different. While we are not certain of the specific changes that will be implemented, we do know certain aspects that were presented in President-elect Biden’s proposed tax plan.
Depending on the make-up of the U.S. House of Representatives and the U.S. Senate, there may be significant changes coming to the tax code. The individual tax brackets will shift up with the highest tax bracket moving up from 37% to 39.6% as well as a possible increase to the capital gains tax rate depending on the taxpayer’s adjusted gross income. In addition to these changes, there is talk around removing the Section 199A Qualified Business Income deduction which would constitute a major shift in flowthrough taxation as it relates to S-Corporations and LLCs.
While this is concerning, it’s not all doom and gloom for most taxpayers. The indication is that taxes will not go up for individuals who make less than $400,000 annually, and there are expansions of current child tax and dependent care credits as Pedro highlighted. The main focus of Congress is most likely to be COVID and economic relief, but there will be tax reform that happens in the 2021 Congressional session and it will be important to stay in communication with your accounting professional so you are readily prepared to take advantage of it when it does come.
Is Now the Time to Review Your Estate Plan? By: Bruce Legawiec
The start of a new year is always a good time to review one’s estate plan, and this axiom may especially be true with the change in Presidency in 2021. Back in 2017, there were significant changes in tax law that increased the estate and gift tax exemption to $11,180,000 per person, with a tax rate of 40% on the excess.
With adjustments for inflation, the 2021 exemption amount is $11,700,000 per person. These high exemption amounts remove most people from being subject to estate tax. And keep in mind – with proper planning – a married couple effectively doubles the exemption. The current legislation is scheduled to sunset at the end of 2025, and effective January 1, 2026, the exemption amount will return to $5 million per person. So, there is still time to take advantage of the high exemption amount?
There are several points in the Biden Tax Plan giving an indication of possible changes to current estate tax law. The analysis seems to indicate a reduction of the estate exemption to amounts that may be as low as $3.5 million per person. However, not only is the lower exemption amount of significance, but also something to consider is the possible acceleration of a change to take prior to 2025.
Other potential changes might include elimination of “step-up” in asset basis upon death, a higher estate tax rate, a tax imposed on appreciated assets at death and reduction of the lifetime gift tax exemption to $1 million dollars.
None of these items are law, however; the potential of these changes merits one reviewing their current estate plan and meeting with an estate tax advisor to assess if it would be beneficial to make revisions prior to enactment of new estate tax law.
To consult with Osborne Rincon about your tax issues, call Osborne Rincon at (760) 777-7805 or go to www.OsborneRincon.com. Osborne Rincon is one of the oldest and most respected full-service accounting firms in the Coachella Valley.
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