Some polls suggest former vice president Joe Biden will unseat President Donald Trump in the November election. Planning ahead is key, as there are many changes that could impact your personal income taxes, investment decisions, gifting to heirs and business moves in 2020 if a new administration is in the works.
If you have non-qualified stock options that produce ordinary income taxes when sold, you should sell in 2020. There are few reasons to hang on to them, unless you are confident that your employer's stock would skyrocket in value under a new administration. The prospect of higher tax brackets and the appeal of diversifying your investments away from employer stock is enough to convince many risk-averse employees to sell.
You should only sell off investments and pay large capital gains taxes this year if you expect to cash in these assets in the coming years.A smarter tax move would normally be to hold your investment for longer than a year. The rates drop considerably, to 15% or 20%, depending on your income. In 2020, the highest bracket of 20% hits single taxpayers earning $441,451 .
Under the Biden plan, tax-loss harvesting strategies are even more valuable. Tax-loss harvesting is a sophisticated technique used to get more value from your investments and reduce taxes owed on capital gains. Temporary dips in the value of your investments, due to a decline in the market, can become a tax-savings opportunity if you sell securities at a loss to offset security sales with gains. If done correctly, this strategy can wipe out any capital gains tax liability.
The prospect of a lower exemption ceiling combined with record low interest rates makes accelerating gifting programs and repositioning assets key, she explains. In summary, Thau said, "we've seen substantial demand for estate planning throughout the normally slow summer months and expect a ramped-up fall reminiscent of 2010 levels, when the estate tax was briefly repealed."
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