Taxes, Taxes and More Taxes
In light of the recent proposals by President Biden and Sens. Bernie Sanders and Chris Van Hollen, here’s what could be coming and some ideas on how to plan for it.


My phone is abuzz these days. With the prospect for higher income and estate taxes looming, more people want to talk about financial planning. The tax hikes may not all be just for the super-rich either.
Here’s a quick review of the tax proposals floating around the Beltway and some of the planning ideas we are reviewing with clients. For a deeper dive, join our in-house tax team for a webinar on May 11, 4pm EST, register here: Estate and Income Tax Proposals & Planning.
Estate Tax Proposals
Sen. Bernie Sanders of Vermont introduced an 18-page bill, the “For the 99.5% Act.” The act calls for lowering the federal estate tax exemption at death for individuals from the current $11.7 million ($23.4 million if married) to $3.5 million ($7 million if married) at death. Estates under the exemption amount are not subject to the federal estate tax at death.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Sen. Chris Van Hollen of Maryland proposed the Sensible Taxation and Equity Promotion (STEP) Act, which would tax capital gains above $1 million at death as opposed to receiving a “step-up” in basis at death. This is like President Biden’s American Families Plan. Currently assets at death in non-retirement accounts – stocks, bonds and real estate – receive a step-up in basis, meaning the cost of original purchase is marked up to the date of death value. A step-up in basis can eliminate the capital gains tax for heirs who inherit and sell the property.
Under the proposals, $1 million of assets ($2 million for married couples) would continue to receive a step-up in basis, plus up to $500,000 for a personal residence (for joint filers, or $250,000 for single filers).
Income Tax Proposals
Big changes in the income tax code may be more likely given that is President Biden’s focus. Possible changes include a near doubling of the long-term capital gains rate from 20% to 39.6% for those with household income greater than $1 million. Currently assets sold after holding for one year are treated as long-term capital gains rather than ordinary income. The lower capital gains rate is usually advantageous to higher income earners.
President Biden also proposed raising the top income tax rate from 37% to 39.6%, reportedly affecting single filers with taxable income over $452,700 and married couples with taxable income over $509,300.
Estate Planning Ideas to Consider
It’s always hard to plan when dealing with a moving target. The proposals by President Biden, Sen. Sanders and Sen. Van Hollen are just that, proposals. Much can change. Having said that, we have a general framework to work with. Maximizing gifting now can make sense. Gifting appreciated assets to children and grandchildren shifts the capital gains to them, which is beneficial if they are in a lower tax bracket. Also, all the appreciation on the completed gift going forward is out of your taxable estate and in the kids’ estate. This is helpful if the estate exemption decreases. Keep in mind, Van Hollen’s proposal is retroactive to gifts in 2021.
Certain trusts can make sense now as well. Grantor Retained Annuity Trusts are used to transfer money to the next generation while limiting the use of your lifetime estate exemption. The proposals on the Hill limit the term of GRATs executed after enacted legislation.
Income Tax Planning Ideas to Consider
There are several income tax planning techniques that may prove helpful. For clients in a high tax bracket, I use an active tax loss harvesting strategy. We invest in a diversified series of exchange-traded funds (ETFs) across many equity sectors. We buy the ETFs at different time periods, creating various tax lots. If a specific tax lot loses money over the course of a year, which happens with stock market volatility, we sell that tax lot and book the loss. We then invest in a similar but substantially different secondary ETF to maintain exposure to that market slice and avoid the wash sale rule.
The goal is to harvest or book losses throughout the year. Direct indexing is a similar strategy. In any given tax year, a client can use the capital losses to offset a capital gain elsewhere. This reduces their taxable income and increases the basis of the new asset. A higher basis is helpful if the step-up in basis rule goes away.
Unused losses are carried forward on a client’s federal tax return for future years. All in all, I would say having an active loss harvesting strategy helps in these taxing times. Every little bit counts.
For more information on tax planning, consider our 7-point Income Tax Review or email me. You can also join our upcoming webinar with Senior Tax Specialist James Rabasca on May 11 at 4pm EST: 2021 Estate and Income Tax Proposals and Planning. Register here: https://attendee.gotowebinar.com/rt/7160812881615812620.
Investment advisory and financial planning services are offered through Summit Financial LLC, an SEC Registered Investment Adviser, 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666. This material is for your information and guidance and is not intended as legal or tax advice. Clients should make all decisions regarding the tax and legal implications of their investments and plans after consulting with their independent tax or legal advisers. Individual investor portfolios must be constructed based on the individual’s financial resources, investment goals, risk tolerance, investment time horizon, tax situation and other relevant factors. Past performance is not a guarantee of future results. The views and opinions expressed in this article are solely those of the author and should not be attributed to Summit Financial LLC. Links to third-party websites are provided for your convenience and informational purposes only. Summit is not responsible for the information contained on third-party websites. The Summit financial planning design team admitted attorneys and/or CPAs, who act exclusively in a non-representative capacity with respect to Summit’s clients. Neither they nor Summit provide tax or legal advice to clients. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local taxes.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Michael Aloi is a CERTIFIED FINANCIAL PLANNER™ Practitioner and Accredited Wealth Management Advisor℠ with Summit Financial, LLC. With 21 years of experience, Michael specializes in working with executives, professionals and retirees. Since he joined Summit Financial, LLC, Michael has built a process that emphasizes the integration of various facets of financial planning. Supported by a team of in-house estate and income tax specialists, Michael offers his clients coordinated solutions to scattered problems.
-
Dow Hits New Intraday High on Fed Day: Stock Market Today
Not even the most important stock in the world could keep the oldest equity index down on a significant day for markets.
-
Savings Goal Calculator
Tools Want to know how much you need to save each month to reach your financial goals? Our calculator helps you build a realistic savings plan.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to Know
If you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both Worlds
Before investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)
An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client Reviews
Financial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop Investments
Truck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams Now
Beyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.