Tax planning is all about identifying opportunities that arise because of changes to a person’s tax situation from one year to the next. Many people think they do not need to consider tax planning because the information on their tax return does not change much year-to-year. Since the end of 2017, at least six new laws have been enacted with provisions affecting the tax code – meaning, the tax situation for many people has changed, if only due to an act of Congress.
The Tax Cuts and Jobs Act (TCJA), which was signed into law at the end of 2017 brought about sweeping changes for businesses and individuals. Since then, additional bills such as the SECURE Act, Disaster Act, CARES Act, FFCR Act and the American Rescue Plan have further changed the tax rules (and therefore the planning) for businesses and individuals.
Just in case you thought keeping up to date with the actual law on the books was difficult; there are currently several proposed bills that suggest even more, changes may be right around the corner. As recently as May, revenue raisers discussed as part of the American Jobs Plan and American Families Plan, could greatly impact the tax treatment of capital gains, gifts made to individuals and trusts, and various business tax provisions affecting small business owners, among others.
Additionally, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was enacted into law in 2019, maybe the most significant piece of retirement legislation since the Pension Protection Act of 2006. Under the SECURE Act, retirees can now wait until age 72 before they are required to take minimum distributions (RMDs) from their retirement accounts. The new law also changed the distribution options that beneficiaries have when they inherit a retirement account. But the fun doesn’t stop here – there is new legislation before the House of Representatives, dubbed SECURE Act 2.0, that would go even further in changing the rules around retirement accounts.
Staying current on all of these new and complex rules can seem daunting, especially since the changes that are most impactful to someone’s financial plan often do not make headlines. Even when a particular legislative change is well known, it may be unclear how or if it affects you.
An important part of our jobs as advisors is to stay informed on recent and proposed legislation that impacts the advice we give to our clients. We do not know what specific legislative changes we will get in the future – but we will be following the available guidance closely. So if you ever wonder how the “insert latest proposed bill here” affects your situation, all you need to do is ask!