Our local media guides do their best to bring us news that isn’t always politics related. However, some state and national media see politics as the only news worth reporting. As a result, most of us now know that the political party that runs the White House and Senate has changed. Since the same political party now controls the executive and legislative branches of our government, and that party did not have that control prior to last year’s general election, changes to our laws are imminent.
As a candidate, President Biden proposed major changes to many laws, particularly those related to taxes. It was stated that these changes would only affect income tax for those earning more than $ 400,000 per year. This is an accurate statement of the applicant’s position. However, the other proposed changes to capital gains taxes and estate / death / inheritance taxes would affect many people in our area, especially people who own their homes.
I am not suggesting here whether possible changes in tax law are good or bad. We lawyers generally just learn and use whatever the law is to help our clients.
Currently, federal tax laws have not changed. And there is considerable uncertainty about how much changes will be made and when those changes will take place. The Biden government has not committed to any changes in tax law this year as the new government first wants to see the pace, timing and scope of pandemic virus recovery. Of course, that doesn’t mean that nothing will change this year.
It is generally legal for Congress to pass retroactive tax laws, especially if the retroactive tax law is retroactive within the same calendar year that the law was passed. Therefore, it is likely lawful for a December 2021 amendment to the Tax Act to be applied retrospectively to January 1, 2021.
Therefore, rushing to buy, sell, trade, or give away assets at this time is a pointless exercise due to uncertain changes in tax laws that may or may not occur this year or in the future. For those of us who want to be proactive, we should now consider two things.
First, organize information. It is wise to make a list of the assets you own. Categorize these assets by real estate, bank accounts, retirement accounts, non-retirement accounts, family businesses and machines, equipment, and other personal property. Most of us have more than we think.
Second, do your research, interview, and consider hiring professionals who can help you determine whether changes are appropriate for you as soon as new laws are introduced. Even with a few assets or a small fortune (or perhaps because someone has little or a small fortune), it is always wise to seek advice from an investment advisor, accountant, and insurance agent. Acquiring and incorporating the advice of these professionals can make money (and protect money) even if there aren’t big changes in our tax laws and the economy.
Lee R. Schroeder is an Ohio licensed attorney with Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning, and agriculture topics in Northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended as legal advice and the licensed attorney of your choice should seek specific advice based on the specific facts and circumstances you are facing.