Are You Ready For The Coming Tax Armageddon?
The Pandemic has cost the US a lot of money. Besides extra unemployment benefits, stimulus payments and tax cuts, there has also been rent relief, mortgage forbearance programs, student loan payment hiatus, the cost of the vaccines and their distribution, the cost of hospitalization and medical care/treatment for those who contracted the disease, plus on top of that is the extra treasury funds being pumped into the economy to keep stock prices and interest rates where they are and Biden’s proposed $1.8 to $3.6 trillion dollar infrastructure packages.
In total you are talking tens of trillions of dollars that at some point will have to be paid for.
While Biden is proposing to increase taxes on the rich to do so, the ultra-wealthy are not the ones crying themselves to sleep over this. Why is that you might ask? Because the ultra-wealthy know how to hide both their assets and income to not show any income or assets to be taxed.
ProPublica recently uncovered a trove of secret IRS files including the tax returns of some of America’s wealthiest people – who legally pay almost zero dollars in taxes. You can read the ProPublica article here.
Note that the wealthiest CEOs are not the only people taking advantage of these (and other strategies which aren’t even required to be reported on your tax return). Think of Hollywood celebrities, athletes and politicians who have no interest in making changes to these schemes which would impact their own financial wellbeing.
What taxes in particular should you be concerned about:
So far the following taxes have all been proposed or floated for discussion:
- Income taxes for Individuals earning over $453,000 and couples making more than $509,000
- Capital gains taxes on taxable investments
- Corporate tax rates - this includes small businesses that are structured to protect the business owner from liability
- Biden is also considering reducing the tax offset on IRA/401K accounts for those earning over just $80,000 a year
- Also on the table are death taxes, either by reducing the tax free amount or increasing the tax rate or both
So who will that leave to foot the increased tax bill?
If you earn $80,000 to a few million as earned income either by trading time for money or from working in your own business, you are Biden’s target.
What is the answer you might ask?
Tax Free Income is a strategy used by my clients for the following benefits:
· Tax Free Income is not reportable income (it does not go on your tax return)
· You can purchase Tax Free Income for pennies on the dollar and also with debt (when structured correctly, the interest on which is a deductible expense) to offset earned reportable income.
· Tax Free Income bypasses probate (to avoid estate taxes which are likely to expand and increase)
· Your Tax Free Income account is available for use as a rainy day fund (you do not need to wait until retirement or a certain age to access it).
If you are interested in a conversation to learn more, reach out here.
