According to news outlets, as of this writing, Joe Biden will be the president-elect of the U.S. following the Electoral College vote on Dec. 14. Vote counting is still ongoing and election results have not yet been certified, but this news may have some taxpayers wondering what changes, if any, they should make in their tax planning to close out an eventful tax year.
The likelihood of a major tax overhaul in the next two years is up in the air as the Senate is not yet decided and may not be until two Georgia run-off elections in January 2021. If Republicans retain the majority, it’s likely there won’t be many changes, but that doesn’t completely lock out any potential adjustments that could come in the next two to four years. Items of agreement on tax policy exist between both parties such as increasing the child tax credit. However, with provisions of the Tax Cuts and Jobs Act (TCJA) set to sunset in 2026, updates to the tax code will be on the horizon by the next election.
Additionally, if the Republican Party indeed holds onto a 51-vote majority in the Senate, it is not unreasonable to imagine a legislative vote in which 2 republican senators vote against the majority of the Republican party to push a tax legislation bill through to the President. Accordingly, between the possibility of a loss of Republican control in 2 to 4 years, the possibility of 2 Republicans voting for a tax reform bill, and the 2026 TCJA sunset, it is highly unlikely tax laws will become more favorable to taxpayers in the in future; thus, we believe there is an urgency to plan carefully and diligently in the last weeks of 2020.
In this article, we’ll examine the key points of the President-elect‘s tax plan, the sunsetting TCJA provisions, and what to keep in mind as you execute your tax plan to close out the year.
President-elect Biden has laid out several of his tax plans the past year on the campaign trail. Here’s what we know based on what he’s shared.
In addition to the President-elect’s plans, the TCJA is still in the spotlight. The TCJA was the most significant tax overhaul in decades when it was passed in 2017. However, as is the nature when dealing with budgetary constraints, many of the provisions of the TJCA are scheduled to sunset by 2026. Below we’ve highlighted a few of the anticipated changes.
For businesses, approximately $4 trillion is expected in new taxes over the next 10 years as provisions begin to sunset including changes to:
For individuals, changes are coming for:
It’s important to note that the above considerations are not an exhaustive list of tax items to review as we close 2020. Work with us to have a proactive plan in place that takes into account various potential scenarios that could manifest in the coming weeks and months. In our follow-up article – 2020 tax planning considerations for businesses, individuals – we’ve laid out some of the key provisions to take into account as you work with us on your end–of–year tax planning.
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