I often talk in this space of how one must use the current tax rules. You should use them to the best of your ability, but you cannot use any other rules. Some people feel like they are in a tricky spot now, though, because they are assuming they will have to pay more in taxes in the near future. A big part of this is coming from an increase in capital gains taxes as part of changes proposed by the Biden administration.
There are certainly ways to take this as a negative thing, as you can read in this article from Accounting Today. That view starts right in the headline talking about how tax planning is “tougher,” and then goes immediately into how the situation is “worrying.” And sure, not everyone who will have to pay more in taxes is going to a fan of Biden’s plan. They may “worry” and feel like it is “tough.” But there are also individuals who support the president’s agenda and will be happy to pay those extra taxes to help fund it.
For I do not know if you have heard this before, but there are two sides to every story.
So of course, the article presents a legitimate view of how there will be some transactions that some people may choose not to carry out because of trepidation over its tax implications. But then again, if you are in a position where you can afford to wait, is that not a form of planning in itself?
The other side of this story is that there will be people who carry out similar transactions, some who may even need to, and they should still do so if they want to. It is probably not a bad idea for such people to be aware of the potential higher tax implications and be ready to pay more than the current tax rate when next year rolls around. But again, is that not a form of planning in itself?
Either way, the key to planning is that you are looking to the future. That look keeps you from being completely surprised by what will roll around. You may not be happy about changes that come about, but when it comes to finances little is ever perfectly predictable anyway. You do the best you can with what you know and use the rules in place when it come time to pay taxes.
So if things feel “tougher” or “worrying,” act in ways to minimize those feelings. None of this means you have to only be run by emotion and throw your hands up in defeat until a political tide turns.
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