Stocks Down – No Stimulus Yet
Biden Income Tax Platform (Georgia)
Stocks took a breather last week as the stimulus stalemate overshadowed the vaccine distribution plan that is creating optimism. It appears most of the stimulus debate is in the details, and not the size. Let’s hope this gets done ASAP, as we currently have approximately 19 million people collecting unemployment benefits that will soon run dry.
In addition, because of the Coronavirus case spike, weekly unemployment claims have been increasing with last week over 850,000 new people filed for benefits.
For the week the major stock indexes were off less than 1%, with the Small Cap Index, the Russell 2000 up 1.03%. The only other bright spot was Emerging Market stocks up .54%.
US Small Cap stocks were in the red, trailing all other US stock indexes all year until recently. Year to Date, the index is now outperforming both the S&P500 and the Dow. Goes to show, diversification and patience can truly pay off!
Biden Tax Platform
Will income taxes rise? Will the increase truly be for only those making $400K or more?
First of all, a platform is not a law, just a mere framework of objectives. Much of what we hear at this point is changed significantly, if placed into law.
President-elect Biden’s tax platform moving forward will depend on the Georgia State Senate Run off on January 5, 2021. If the Republicans maintain control of the Senate, we should not see too much change to the tax code, however you should expect some compromise.
If the Democrats win the run-off and control all 3 branches of government, you should expect to see many aspects of the Biden Tax Platform become law.
This unknown makes it very challenging for many to do year-end tax planning. For example, some businesses may benefit from moving 2021 income to this year or putting off expenses until 2021 to increase income this year anticipating rates move higher. Tough call.
One area of tax planning that makes sense now is regarding the SALT limitation in New Jersey. When you’re calculating your itemized deductions, the amount of your Real Estate and NJ State Income taxes are capped at 10K. Most of you are already there, so if you can postpone any of these taxes until 2021, perhaps the SALT limitation will be eliminated, as most Democrats have indicated that may happen.
Here’s a little example of the potential income tax impact for a couple filing a joint return, who in 2020 has a taxable income of a $500,000. Their first $414K hits a marginal bracket of 32%, with the balance hitting the 35% tax bracket. Under the potential change, all income above 400K or 100K will be taxed at 39.6%, the highest bracket in the United States. We don’t know if the $400K is for Single or Joint taxpayers at this time. What will happen? As always, time will certainly tell!! If the Democrats take the Senate, we’ll certainly provide a complete explanation of all aspects of the tax platform.
If you would like to discuss year-end tax planning, now’s the time. Please feel free to schedule a consultation, which can be done via Zoom or a phone-call. We have temporarily suspended all in-person consultations and appointments until further notice. Obtaining quality tax advice is always recommended!