President-elect Joe Biden wants to raise taxes in some areas, in effect reversing President Donald Trump’s 2017 tax legislation. Biden’s ability to do that may hinge on whether Republicans maintain their Senate majority, which the outcomes of two runoff elections in Georgia on Jan. 5 will determine. Even if the GOP keeps the two seats, their hold will be narrow and there’s no telling what will happen legislatively. To prepare for possible tax increases, Bruce Bell, an attorney at the Chicago office of Schoenberg Finkel Beederman Bell Glazer, has some advice:
Larry Light: With the 2020 calendar year coming to a close, please provide some suggestions for tax planning moves to make before year-end.
Bruce Bell: The time value of money principle has long taught that a dollar today is worth more than a dollar tomorrow. As such, conventional year-end tax planning has always involved accelerating deductions to the current year and deferring income to the following year to postpone the payment of income taxes.
With the increased budget deficit and a new presidential administration seemingly less inclined to keep recent taxpayer-friendly legislation intact, a meaningful tax increase may be in the making for next year and beyond. That being said, the better strategy for 2020 may be to accelerate income to 2020 and defer deductions to 2021.