If you are wondering what all the talk about the dependent care tax credit is, and how it will affect you going forward, then stay tuned. You’ll definitely need to talk to a financial planner and fast – because everyone will be affected by the changes disallowing you to escape the wealth tax. Here is how it is panning out…
The plan might be that you will pass your accumulated wealth down to your heirs and beneficiaries when you die. That is a great plan, but the changes in the laws will prevent any more step-up on the basis for gains over $1 million. There will also be taxation of gains of property that is not then donated to a charity. The exceptions will be for family-owned businesses and farms, where no taxes are applied if your owned business gets taken over or passed to heirs and family members on your death.
What is the Deal with the $1 Million Limit?
In general, the first $1 million of gains from capital gains taxes will be exempt under the new laws. This is significant, especially if this money is placed in a dynasty trust. That dynasty trust will cache wealth in tax-free trust funds, that proliferate unfettered for literally decades, to quarter of half centuries. But President Biden’s proposed law will ensure that any monies transferred from a trust get taxed at capital gains. Additionally, there will be a requirement that the trust assets be taxed on the appreciated funds, probably at least one time every 90 years.
You need to talk to a Texas estate planning lawyer today, to be prepared for any tax law changes coming up in the next few months. It’s critical to protect your money right now, keep it safe and secure, as the new tax laws and exclusions are being formulated and finalized in the upcoming months for sure.
Biden Tax Law to Fund Designated and Earmarked Social Programs
As a last note, if you were wondering where the taxed money is supposed to go– it is to fund President Biden’s social programs. The wealthy in this country will no longer be able to pass their wealth down the generational line to the next generation on the family tree, without experiencing huge tax consequences. That means simply that capital gains will again be taxed as earned income. Capital gains profits, such as profits from assets sold, taxes max out at 20%, whereas it is 37% for income from your general labor.
Additionally, President Biden plans to fund the American Families Plan to offer everyone potentially unlimited access to the following services (list not complete):
- Free childcare
- Free early childhood education
- Free college education
- Free healthcare
- Increased awards for Pell Grants
- Increased investing in teachers
- Head Start employees to earn $15.00 per hour wages
- 2 years free community college
- College and university programs increased
- Grow Our Own Program for teachers ($8,000 in scholarships)
- American Jobs Plan investments
- Paid Family and Medical Leave for parents
- Increased Summer EBT Program eligibility for children
- Expand Community Eligibility Provision (CEP) (free school meals for children)
- Increase healthy foods initiatives
- Allow ex-felons to receive Supplemental Nutrition Assistance Programs (SNAP)
Everyone has questions on these new laws. At every level of income, you should check in to ensure that your money is still as protected as you thought it was yesterday in your bank. Working with an experienced Texas estate planning law firm can help ensure that your estate plan is up to date with the latest tax laws and much more.