Legal Ease of Use: How to Prepare for Impending Tax Law Changes
The terms have not been clarified, but changes in federal tax law will come into effect in the coming months. Once announced, the details could prompt big and immediate changes in people’s real estate projects, especially for those who own small businesses and farms. The immediacy of the willingness to adapt to these changes in tax law is amplified when tax increases are applied retroactively.
Due to the uncertainties in the details of the tax reforms, it is very difficult to take immediate action to reduce taxes under these new laws. Therefore, it is often wise to wait now. Regardless of the details, however, there are steps that can currently be taken to prepare generally for changes in tax law.
First, decide where you stand. A personal / professional balance sheet (not flashy or formal) listing all of your liabilities in a format similar to all of your assets (literally all) by category and value tells you where you are now. Being able to know, you will (quickly) be able to know what to do when the details of the tax law change are announced.
Next, consider investigating tax exemption investments. For example, interest earned on money loaned to many municipalities is not taxed. Duty-free government bonds and Roth IRAs become more attractive investments as tax rates rise. Of course, only “earned income” can be used to fund a loss IRA, so those considering early retirement should consider their ability to earn income in order to use certain tax-exempt investment tools. . There are.
Third, be prepared to investigate tax-deferred investments such as traditional IRAs and pension plans sponsored by many employers. When the tax rate increases, you can save money by deferring tax to a later date when your income may be low (even though the tax rate remains high at that time).
Fourth, for some people, although the tax rate is relatively low, it may be a good time to “top up” to immediately pay taxes on a particular asset / investment.
In other words, maybe it’s time to take some assets out of the business, pay taxes, and plan to save / defer taxes in the future (often in the future, adjusted for of these assets). Will be). If this is a reasonable consideration for you or your business, conversations with key advisors about it should be arranged immediately to increase your chances of completing it by the end of the year.
Fifth, if your net worth exceeds around $ 3 million, you can give gifts, charitable donations, or otherwise (relatively) high ($ 11.5 million per person per life) in gift / inheritance tax. Maybe it’s time to consider using a tax exemption amount. The limit will automatically be reduced to around $ 6.5 million in 2026 and could be reduced to $ 3 million even faster due to changes in tax legislation currently under consideration. However, this type of gift should always be coordinated with expert advice so that future opportunities to save on gift / inheritance tax are not lost.
Lee R. Schroeder is an Ohio Licensed Attorney at Schroeder Law LLC in Putnam County. He limits his activity to business, real estate, real estate planning, and agricultural issues in Northwestern Ohio. He can contact [email protected] or 419-659-2058. seek specific advice from a qualified lawyer of your choice based on the specific facts and circumstances you face.