Taxation Strategies and Proposals

Susan Jung |

Believe it or not, there is a presidential election next year in 2020. Has it really been 2 ½ years since the last presidential election?
As is usually the case, candidates running for office make proposals to capture the attention of voters to highlight what they perceive to be important economic initiatives. It’s wise to remember that proposals are not promises. It’s also important to recognize that ideas pitched into the public dialogue often will not generate enough bipartisan support to become tax law and policy. 
The tax code is complicated. While there has been a reduction in some regulations, taxation is still a major focus for investors as they invest portfolios for the best possible net returns. Current tax strategies that investors can take advantage of include:

  • Capital gains planning and matching to capital losses
  • 1031 exchange for real estate investment property
  • Gifting of assets to charitable organizations to receive tax reductions
  • Income strategies connected to charitable organizations resulting in income stream flows to investors and the residual amount is left as a donation to the charitable organization
  • Special economic development zone investments
  • Establishing businesses where fractional ownership can be divided among family members potentially resulting in lower valuation gifts
  • Watching carefully to assure dividend income received is granted preferential treatment

These tax strategies are just a subset of the types of planning discussions that we have with those we serve at DWM. We have 17 CERTIFIED FINANCIAL PLANNER™ professionals on staff that are ready to discuss with you your planning circumstances. Additionally, we can discuss with you taxation matters and connect in qualified accounting professionals as needed to provide guidance as well.
Future tax strategies will surely adjust as laws change and politics impact economic policies. The proposals currently being floated in public discourse all amount to a change in tax structure and a focus on addressing the perception that some taxpayers receive preferential tax treatment. Politics and philosophy drive proposals.
Some of the current ideas being floated in this year’s beginning presidential cycle include the following:

  • Raising taxes on taxpayers with $5 million or greater net income
  • Bringing back the estate tax for smaller estates when the current tax law expires
  • Taxing capital gains on an annual basis even if you haven’t sold the asset
  • Increasing the capital gains rate
  • Increasing all taxpayer rates to fund social programs and deficit reduction
  • Entitlement reform designed to limit the impact of longer life expectancy on Medicare and Social Security trust funds

Have I got your attention? 
As you can see, many of the proposals would have a significant impact on investors and taxpayers. That is why we carefully assess proposals and the likelihood of implementation. It’s important to keep in mind these proposals as one develops investment strategy as the macro environment, including taxation policy, can impact investment strategy.
We do not expect all of these proposals to see the light of day; some will meet bipartisan rejection. But remember that with each new administration, there is a focus on economics based on their perspective on taxation. That trend will continue.

The CERTIFIED FINANCIAL PLANNER™ program is administered by the Certified Financial Planner Board of Standards Inc. Those with the CFP® certification have demonstrated competency in all areas of finance related to financial planning. Candidates complete studies on over 100 topics, including stocks, bonds, taxes, insurance, retirement planning and estate planning. In addition to passing the CFP certification exam, candidates must also complete qualifying work experience and agree to adhere to the CFP Board’s code of ethics and professional responsibility and financial planning standards.

The opinions expressed herein are provided for informational purposes only and are not intended as investment advice. All investments involve risk, including loss of principal invested. Past performance does not guarantee future performance. Individual client accounts may vary. Although the information provided to you on this site is obtained or compiled from sources we believe to be reliable, Destination Wealth Management cannot and does not guarantee the accuracy, validity, timeliness or completeness of any information or data made available to you for any particular purpose. Any links to other websites are used at your own risk.