The end of the year always means the possibility of last-minute tax changes, and this year, that's especially true. Some of the new legislation may mean major changes starting in the new year, but other proposed bills, such as new capital gains and qualified dividend tax rates, may take effect retroactively. And taxes on the wealthy may go up, too.
These possibilities make it difficult to plan with certainty. Specific provisions under consideration include those discussed here. Note that, if passed, these provisions are likely to be subject to certain exclusions and dollar limits:
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Although it's not clear what changes we'll actually see by year-end, these are changes that should be considered as part of 2021 year-end tax planning. In addition, at least two other tax topics still might be included in a final bill: (1) a change in the $10,000 state and local income tax and (2) an increase in the estate and gift tax rate. (However, the $11.7 million allowance is scheduled to sunset on Dec. 31, 2025, unless it is extended.)
Debate around all these provisions is ongoing, but prudent taxpayers should become familiar with how they can change business and estate plans going forward. Here are six proactive measures that can result in lower taxes should these changes in the tax code be enacted:
Keep in mind that the situation is changing rapidly, and your best bet is to keep in close touch with financial professionals.
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