With the election of a new administration and a change in control of the United States Senate, there are expected to be changes to United States tax provisions for businesses and individuals. The changes that will be enacted and when they will be effective are the subject of great debate. However, looking at the proposals from the campaign trail, we are advising businesses and individuals to look at opportunities to position themselves to be agile as some of these changes will inevitably be brought forward.


Proposed changes to expect in business:

  • Increase in the corporate rate from 21% to 28%
  • Add a 15% minimum tax on corporate income above $100 million
  • Increase global intangible low-taxed income, which taxes US business income earned overseas and not brought back to the United States to increase from 10.5% to 21%
  • Additional deductions for green energy production
  • Incentives for employee retention

Proposed changes to expect in estate planning:

  • Lowering the federal estate tax exemption from $10.58 million to $3.5 million
  • Removing the “step-up in basis” at date of death for appreciated assets

Changes that could potentially impact individuals:

  • Collecting additional social security taxes for Individuals earning $400,000 or more
  • Increase the top individual federal income tax rate from 37% to 39.6%
  • Delete the provisions of tax-free exchange of assets
  • Allow tax relief for student debt forgiveness
  • Restore tax credits for first-time homebuyers
  • Restore deductibility of state taxes

Business Recommendations

For our business clients we are first recommending they focus on keeping their business strong through the COVID-19 Pandemic Crisis and taking advantage of the programs available to them through the stimulus legislation.

Next we are advising them to look at income and expense allocation opportunities for their fiscal years reporting as it is currently not anticipated that the changes will be retroactive and effective against 2021 reported income. We are also encouraging the examination of highly compensated employees’ structure as those earning over $400,000 per year may be subject to many of the increased provisions.

With our business clients having operations overseas we advise them rethink expansion of those operations and looking for opportunities to bring assets and employees back to the United States.

With infrastructure improvements or expansions, we encourage our clients to look for green energy solutions to take advantage when proposed incentives are enacted.

The tax credits proposed for employee retention include benefits to deal with workforce layoffs and small business incentives to provide retirement savings plans.


Estate Planning Client Recommendations

With the proposal of reducing the federal estate tax exemption to as low as $3.5 million dollars many more of our estate planning clients will be considering estate planning to increase the amount they are able to pass on to their heirs. There are many tools to employ in accomplishing these transfers, but some may need to be effectuated prior to the tax change being implemented, so we are suggesting that clients who will be subject to tax under this new structure discuss their situation as soon as possible.

The second change is significant for our farming and family business clients relating to the “step-up in basis” rule that increases the tax basis for inherited assets to their full fair market value upon death. If planning and current gifting to or purchase of farms and businesses to succeeding generations are not accomplished, the tax burden at the death of the current generation may put a strain on the ongoing operations.


Recommendations for Individuals

The changes are designed to place additional tax burden on those individuals earning over $400,000 annually, if our clients earning in that range are also owners or leaders of their organizations we encourage them to begin looking at their compensation structure to see what opportunities are available to reduce their reported income. For benefits to those earning less than $400,000 we encourage them to explore the tax credits that are proposed to be available to them for a variety of opportunities including child and dependent care, retirement tax benefits, health insurance costs, first-time homebuyer credit, and student debt.


Overall, the best advice is to utilize your time with your tax professional when preparing your taxes this year to explore what all the proposed changes might mean to you and your business. Contact your attorney and financial planners to look at your current estate plan and business succession plans. If you are not finding information that gives you answers, please reach out to Goosmann Law Firm and discuss the changing landscape with our transactional and estate planning experts.

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