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Proposed Tax Policy Revisions: What You Need to Know

We’d like to introduce you to a new regular video series entitled, “Coffee with Brendan.” In these short 5-7 minute videos, Brendan will share a story about an actual question he answered for a client that week. This week, he’ll discuss the new tax proposal and what you need to know looking ahead to 2022. Watch now to see specific numbers, dates to remember, and additional details to note. Be informed before these revisions pass!

Topics Discussed:

  • Proposed tax policy changes for 2022

  • Breakdown of current and proposed income and capital gains tax rates

  • Dates to note – mark your calendars!

  • Why you should consult your CPA or a tax advisor

  • Questions to ask about how these changes might affect you


Hi and welcome to the first Waymark, two to five minute, end-of-week storytelling time, where I'm going to relate to you an actual story that happened this week with one of my clients. So I had a client come in, I think it was Wednesday of this week, and she asked me a question that was a great question. She said, I heard that taxes are going up in 2022. Should I be doing anything about it at this point? And the answer is only if you're making $400,000 as an individual and $450,000 as a married filing jointly. So let me just show you what's going on here using a really neat presentation that I saw a couple of weeks ago. Long story short, the House Ways & Means Committee passed a bill and it showed in writing what the tax bill was going to look like.

Now, this is almost definitely not going to be the final draft because it has to be voted in by the house, then it has to go to the Senate, then it has to go to the President's desk. So there are definitely going to be some changes along the way, but as it stands right now, this is the proposal that will take effect in 2022. Now, again, the number one thing I want everyone to kind of focus on here is the fact that it's only impacting clients that are making 400 if you're single, or $450,000 married filing jointly. For those of you making less than that, most of the things that you're going to hear about with this tax bill, at least again, in this current September 13th form, won't really impact you. But for those that are making more than that, it definitely will impact you and it's going to be a big deal.

So, here we go. So, long story short, the top tax bracket right now is 37%, but most people, especially if you're right around that 400, 450 place, they're at a 35% tax bracket. Let's say, let's just bump it up a little bit here and say that if you're an individual you're making $500,000. So in 2021, someone making $500,000 as an individual pays tax at the 35% tax bracket, but just three months from now that same taxpayer is now paying tax at a 39.6% tax bracket. That's a pretty big jump from 35% to 39.6%. So again, that's, that's, that's going to impact people in one of the tax strategies, and again, I urge you right now to, if you're making that kind of level of income, speak with your tax advisor. We are not tax advisors and please don't act on anything that you're going to hear in this short video.

But long story short, you could take some, some actions today, like accelerating income so that you actually realize it in 2021 or potentially delay deductions till 2022. Now I know it's not necessarily politically correct to say, but if you're thinking about making a big charitable gift, you may want to wait. You know, if you're, if you're in these income, income bands, you might want to wait until 2022 to actually make that big charitable donation. So that's number one is the income taxes and how they're going to change. But the other thing that is going to change is capital gains tax rates. Now capital gains tax rates are going to, again, one of the things that not many people really appreciate here is that capital gains tax rates are actually a graduated tax rate. You know, most people think that it's pretty much 15%.

If you have a long-term capital gains tax or a long-term capital gain, then you pay tax at 15%. Nay, nay. If you're not making that much money, you could actually not pay capital gains tax rates, even if you trigger thousands of dollars of capital gains, and that is for people, if they're individuals making less than $40,000 and for married filing jointly making less than $80,000. But if you do fall into the tax bracket that most people fall into that is where that 15% tax bracket comes in. Well, if you, and this is today, so this is current, if you're making more than 445,000 or $500,000, you pay tax at 20%. What's changing is that the 20% is, is planned on being wiped away and the 25%, so you're going from 15% to 25%, once again at those magic numbers, 400 and 450.

So these two taxes piggybacking on each other are going to impact people and people that, these wealthy people making 400, 450 are going to be paying more in taxes in 2022, the way that these laws are written. So again, let me finish this with the disclaimer. Don't take any action just based on what you've seen in this video, but definitely, this should be your wake up call to call your CPA, your tax advisor, and ask them what is my income going to look in 2022, and if this tax law goes through, how will it impact me, and should I be doing anything about it in 2021? So thanks for watching today. Hopefully, this was helpful and we will have another one of these next week. Have a great weekend.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: CA, CO, CT, DE, FL, GA, IN, MA, ME, MT, NC, NH, NJ, NY, PA, RI, SD, TX, VA & VT

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


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