Many of us are happy to see 2020 come to an end. A worldwide pandemic and the economic strain felt by many are reasons to look forward to ringing in the new year. But before you say goodbye to 2020, it is important to evaluate your tax obligations.
Uncertain Future for Taxes
The political climate has made tax planning more difficult, since we have yet to see the proposed tax policy from the incoming administration. President-elect Joe Biden made some comments during the campaign regarding his tax plan. Included in his proposal was raising the top individual income tax rate to 39.6%, raising the capital gains tax at 39.6% for taxpayers with an income over $1 million and eliminating step-up of basis at death.
The CARES Act created an above-the-line deduction of up to $300 for contributions from taxpayers who do not itemize. To take advantage of this, be sure to make charitable donations before the end of the year. The incoming administration has stated that itemized deductions would be capped at a 28% tax benefit instead of the current 37%, so it makes even more sense to make donations now.
Consider Increasing Withholding
COVID-19 caused cash flow problems for many people. Make sure your withholding and estimated taxes match in order to avoid paying a larger tax payment.
Consider a Roth IRA
If you have lost income during the pandemic, it may make sense to convert your traditional retirement account to a Roth IRA. Your after-tax dollars will grow tax-free. A traditional IRA or 401(K) are subject to regular income taxes.
The COVID-19 pandemic and a roller coaster political season have caused many of us to doubt our economic future. Be sure to be prepared for the end of the year by consulting a tax planning attorney. Contact Robert Turner today to schedule a free initial phone conversation at (404) 377-6941.
Posted on behalf of Turner Law, LLC