San Antonio-Based Monticello Wealth Management Gives Sound Advice on How to Interlace Tax and Investment Decisions to Achieve Wealth Objectives
SAN ANTONIO—March 30, 2021. San Antonio-based investment advisor company Monticello Wealth Management (Monticello) today discussed tax relief for Texans following February’s severe winter storms and potential tax changes under the Biden administration.
“This is an almost unprecedented time for Americans in terms of changes in tax laws stemming from both the COVID-19 pandemic and the recent winter storms,” said Monticello Senior Advisor Dan Slattery, CPA, PFS.
On February 22, the Internal Revenue Service announced victims of February’s winter storms who reside in or have a business in any of Texas’ 254 counties qualify for federal tax relief. Specifically, Texas taxpayers have until June 15, 2021, to file various individual and business tax returns and make tax payments. This includes various 2020 business tax returns due on March 15 and 2020 individual and business returns due on April 15. Taxpayers also have until June 15 to make 2020 IRA contributions. The June 15 deadline applies to the fourth quarter estimated tax payment due on April 15, quarterly payroll and excise tax returns normally due April 30, and tax-exempt organizations operating on a calendar-year basis that have a 2020 return due May 17.
Looking toward potential changes ahead, Slattery said, it is important to realize none of President Biden’s agenda will pass easily without support in the Senate, and the extent of that support has not yet been tested. The administration will almost certainly seek to raise taxes on more wealthy Americans, possibly returning to the 39.6% tax bracket for incomes over $400,000. The administration may also seek to phase a portion of itemized deductions as income exceed certain levels. Likewise, high-income individuals may expect to see the tax savings applied to charitable contributions capped at 28%.
The big-ticket item, though, is likely to be removal of the comparatively low tax rates for capital gains recognized by individuals. That is, one Biden proposal is to tax capital gains and dividend income as ordinary income for individuals with taxable incomes exceeding $1 million.
The administration and the U.S. Congress may also seek to raise the current estate tax rate and apply the estate tax to a much broader group of taxpayers. In 2018, the estate tax exemption—which is applied per individual and effectively doubled for married couples—increased from about $5.5 million to about $11.2 million. If the Biden administration lowers that exemption, the estate tax will impact many more families. Although the administration has not given specifics, indications are the exemption could be as low as $3.5 million. Therefore, certain individuals who have between $3.5 million and $11 million in property—such as retirement plans, personal residences, family businesses, savings accounts or other assets—could find themselves exposed to a 45% estate tax, where previously their exposure may have been zero.
On the positive side, if an individual makes a gift of $11 million now, but passes away during a year when the estate tax exemption has decreased to $3.5 million, there is no “recapture” or tax on the amount given away more than $3.5 million. Therefore, individuals who might find themselves subject to the estate tax should consider making gifts to family members sooner, rather than later, to minimize their exposure to future estate tax.
Slattery joined Monticello in August 2019 and assists both Monticello professionals and outside professionals in advising top-tier clients on how to establish and implement an agenda to prioritize financial-planning strategies. Slattery’s knowledge encompasses a broad range of wealth management practices, including the use of complex tools such as trusts and partnerships in estate planning and techniques to help minimize income, gift and estate taxes. He has counseled owners and executives of closely held businesses, as well as other individuals, on their personal financial issues, including real estate planning and income tax planning techniques.
“With a new administration come new ideas and a new direction, and some of those new ideas may significantly impact how you think about your taxes and investments,” said Monticello President Todd Brockwell. “Monticello has extensive knowledge and experience to advise its clients on how to proactively interlace tax and investment decisions to achieve the best outcome for your wealth objectives and your family.”
