Our local media leaders do their best to provide us with news that is not always related to politics. However, some state and national media treat politics as the only news worth reporting. Therefore, most of us now know that the political party in charge of the White House and Senate has changed. Because the same political party now controls the executive and legislative branches of our government, and because that party did not have that control before last year’s general election, changes to our laws are impending.
As a candidate, President Biden proposed significant changes to many laws, particularly those involving taxes. Those changes were explained as only affecting income tax for people earning over $400,000 per year, which is an accurate statement of the candidate’s position. However, the other proposed changes in capital gains taxes and estate/death/inheritance taxes would affect many people in our region, particularly people who own their homes.
I do not assert an opinion here on whether potential changes in tax law are good or bad. We attorneys generally, simply learn and apply whatever the law is to help our clients.
Right now, federal tax laws have not changed. And there is significant uncertainty concerning how much change will be implemented and how soon those changes will take place. The Biden administration has not committed to making any changes in tax law this year, because the new administration first wants to see the pace, timing and scope of pandemic virus recovery. Of course, that does not mean that change will not happen this year.
It is generally lawful for Congress to pass tax laws that are retroactive, particularly if the retroactive tax law is retroactive within the same calendar year as when the law was passed. So, it is likely lawful for a tax law change in December 2021 to apply retroactively back to Jan. 1, 2021.
Therefore, rushing at this time to buy, sell, trade or gift assets due to uncertain changes in tax laws that might or might not happen this year or in the future is an exercise in futility. However, for those of us who want to be proactive, we should consider doing two things right now.
First, organize information. It is advisable to create a list of assets that you own. Categorize those assets by real estate, bank accounts, retirement accounts, non-retirement investment accounts, family businesses and machinery, equipment and other personal property. Most of us own more than we think we own.
Second, investigate, interview and consider hiring professionals who will be able to help determine if changes are appropriate for you once new laws are introduced. Even with few assets or a small net worth (or maybe because someone has few assets or a small net worth), it is always advisable to consult with an investment adviser, accountant and insurance agent. Acquiring and integrating these professionals’ advice can make money (and protect money) even when big changes in our tax laws and economy are not taking place.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.