#2021 TAX CHANGES CODE#

“Founders were using the provision to contribute shares to trusts and then stacking those $10 million exclusions on top of each other,” Tara Thompson Popernik, director of research for the wealth strategies group at Bernstein Private Wealth Management. That would help reduce the impact when people find ways to take the deduction multiple times. The proposal would cut that $10 million amount to $5 million. “This proposal threatens to eliminate grantor trusts on the date the bill is enacted.”Īnother proposal looks to curtail the preferential treatment of the shares that start-up founders and early employees receive, known as the qualified small business stock limitation.Īs it stands now, the first $10 million in those shares when the company goes public can be excluded from tax. “Grantor trusts have been the bread and butter of estate planning,” Mr. Or a person could use a different type of grantor trust to pay all the taxes on the investment in the trust, allowing that investment to grow tax-free. One is shutting off access to various types of grantor trusts that provide enormous wealth transfer opportunities for the super wealthy.Ī popular type lets someone put an asset, like stock in a private company that is about to go public, into a short-term grantor trust and pass all the appreciation to an heir tax-free. It’s the maximum tax rate that affects the biggest estates.”Ī host of other proposals, though, aim to clamp down on areas that have allowed the wealthiest and most sophisticated Americans to pass substantial wealth to heirs tax-free. “The exemption amount is important but not really important. “If we want to prevent dynasties, what’s most important is the top estate tax rate,” said Harland Levinson, a certified public accountant in Beverly Hills, Calif. That’s what matters to the largest estates. While the proposed exemption would fall to about $6 million a person from $11.7 million, the estate tax rate would remain at 40 percent.

But that isn’t likely to raise more revenue from megamillionaires and billionaires. One change would bring the estate tax exemption back to the level it was at in the Obama administration. Taxes affecting estates and large gifts have long been ripe for tax changes. It would not have been a popular strategy.” It would have impacted a lot of people, not just the top 1 percent or the top 0.1 percent. “But it also benefits any person who is inheriting a home from their parents and grandparents that could have hundreds of thousands of dollars that could be subject to capital gains tax. “The provision benefits very wealthy people who have built businesses,” said Justin Miller, the national director of wealth planning at Evercore Wealth Management. “We have far fewer deductions, so that 39.6 percent rate is a much higher rate.” “You have to look at the effective rate,” said Pam Lucina, chief fiduciary officer and head of trust and advisory services at the financial services firm Northern Trust.

#2021 TAX CHANGES CODE#

Currently, the highest income tax bracket, at 37 percent, starts at $523,600 for an individual and $628,300 for a couple.īut those affected by the new rate would also pay more because there are fewer deductions than there were in the tax code before the 2017 changes. It kicks in at $400,000 of income for an individual and $450,000 for a couple, which is slightly lower than the income level in 2017. The proposed top income tax rate of 39.6 percent looks like the old top rate of 39.6 percent from 2017. These proposals get at personal income tax.” “Increasing the corporate tax rate does not get at the wealthy because corporate taxes are paid by the shareholders, who get less dividends, the employees who get less salary, and the consumer, who pays more for goods and services. “All of this legislation is focused on the individual and upping the ante for the wealthy,” said Michael Kosnitzky, a partner at the law firm Pillsbury Winthrop Shaw Pittman.

2021 tax changes