Present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client. Estate planning: Estate taxes may affect more taxpayers, as proposals suggest reducing the per person estate-free lifetime limit from $11.7 million to as low as $3.5 million per person. Other plans accelerate the ‘sunset’ that will occur in 2026 under current law, which reduces to $5 to $7 million. Additionally — and perhaps more impactfully — as proposed, death will be considered a taxable transfer event where cost basis is no longer ‘stepped-up’ but rather all unrealized gains are recognized as death.
Present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client. Retirement savings changes: Under current law, taxpayers do not pay any tax on contributions to pre-tax retirement plans. A new proposal would replace the deduction with a 26% credit. In effect, lower-income earners (those in brackets lower than 26%) would reap a higher benefit by contributing to pre-tax retirement accounts by receiving 26 cents per dollar of contribution. Conversely, higher-income earners may have to begin paying tax on pre-tax retirement contributions. For example: If a taxpayer finds themselves in the 39.6% bracket and they contribute to their 401(k), they will receive a credit of only 26% and have to pay 13.6% on the contribution. If they are in the same tax bracket when they later distribute the money, they will have to pay an additional 39.6% tax. In total they will have paid 53.2% of tax on their retirement savings if the plan is passed as outlined.
Present both positive and negative consequences of the proposed tax law change with relation to the topic stated below: Assume that this is presented to your most valuable client. Capital gain tax: For taxpayers whose income exceeds $1,000,000, capital gains may become taxed at ordinary income rates. Under the current draft of the full proposal, they would nearly double from 23.8% to 43.4% when accounting for the Net Investment Income Tax (Links to an external site is- https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax) of 3.8%. While the increase in the capital gains rates may end up landing around the 25% to 28% range based on the political climate, there is still an expectation that rates will increase.
