Now that the election year has arrived and up grabs, anything can happen. Most candidates are talking about at least some sort of tax increase, while others have taken to demanding a “taxmageddon” on the public.
Because anything can happen with tax rates this year, you will want to do your best to protect your wealth, what you’ve labored for, from the greedy hands of the government. Take a few steps now just in case someone decides they have a higher claim to your wealth than you do.
If you expect to be in the same or lower tax bracket in future years, making moves that lower your current-year income will, at a minimum, put off the tax day of reckoning and leave you with more cash until the bill comes due. If your tax rate turns out to be lower in future years, deferring income into those years will cause the deferred amount(s) to be taxed lower rates.
The problem, however, is that expecting the government to lower taxes is farfetched. The lower individual federal income tax rates ushered in by the Tax Cuts and Jobs Act (TCJA) (seven rates topping out at 37%) are already scheduled to expire at the end of 2025. Unfortunately, depending on the 2020 election outcome, these tax cuts could be terminated much sooner. If that happens, the probable best-case scenario (for those who don’t enjoy paying taxes) would be a return to the pre-TCJA deal (seven rates topping out at 39.6%), starting in 2021.
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The worst-case scenario is a higher tax rate on income. And this is the most likely outcome if any of the democrats running happen to get elected. This would come along with higher rates on dividends and long-term capital gains too, which are currently taxed at 0%, 15%, 18.8%, 20%, and 23.8%. (The 18.8% and 23.8% rates include the add-on 3.8% net investment income tax (NIIT) that can hit many higher-income folks.) Deductions could be eliminated too.
So, what do you do if the worst case happens? It’s hard to say, and you’re going to have to make an educated guess here. If you think the worst will happen in 2020 and “taxmageddon” will happen retroactively, you would be better off just sitting tight for the rest of this year and for 2020. That would increase your tax bills for those two years but decrease your tax bills for later years by a greater amount. You’ll come out ahead in the long run.
The best advice, however, is to work with a tax professional. Assess your future and make the appropriate moves. No one can possibly know what the future holds and everyone is in a different situation. The only thing that’s almost 100% guaranteed is that the tax rates are not going down. Do what you can by working with a professional to ensure your personal wealth that you’ve worked hard for is protected for years to come.
Either way, it’s important to start figuring out how to protect your assets from those who want to take them from you.
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This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. We have been previously compensated by First Majestic Silver sixty thousand dollars and stock options. We currently have no active agreement with them and were not paid for this new coverage. We currently own shares and will not sell any within ninety days of any email coverage. We will never sell any shares during any active email coverage. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought