When it comes to taxes, investors and their advisors have been on a roller coaster this year, careening through a legislative funhouse of trapdoors and hidden surprises. Best stay buckled in, because the wild ride is continuing into 2022.
What began in 2021 as a push by the Biden administration to raise rates on the wealthiest Americans has gone through head-spinning reconfigurations. Gone are the White House’s original proposals to hike the top individual rate to 39.6% on people making at least $400,000 a year and nearly double the capital gains rate for those making at least $1 million. Gone is the administration’s call to end the ability to inherit assets with more than $1 million in appreciation without paying tax.
What’s now in place is a slightly kinder and gentler $1.8 trillion tax-and-spending bill passed by the House of Representatives in November. The Build Back Better plan, which itself went through substantial changes last fall, calls for a new 5% to 8% “surcharge” on millionaires. But it’s all on hold until the new year, amid opposition in the Senate.
That doesn’t mean it’s time to sit still, even with only a few days left in 2021.
“We follow an annual financial planning calendar and discuss tax planning with clients in the fourth quarter of each year,” said Jeffrey Nauta, a principal at Henrickson Nauta Wealth Advisors in Belmont, Michigan. “That review includes a current-year tax projection along with any scenarios that could provide tax savings.”
Despite the uncertainty, there are still a few safe moves to make before 2022. Here are the top five: