On August 24, 2021 the House voted to approve the fiscal year 2022 budget resolution that provides reconciliation instructions for the massive human infrastructure bill.
Here are some areas that, if passed, might impact you and / or your business:
• Individual income tax rates will likely increase from 37% to 39.6%.
• Top long term capital gains rates will likely increase from 20% to somewhere between 25% and 39.6% for households with more than $1 million of income.
• The deduction for state and local taxes will be expanded to somewhere between $25,000 and $40,000.
• There will be an overall limit on itemized deductions. Effectively limiting their value to 28%.
• The lifetime exemption for estates will be significantly reduced from $11.7 million per person to between $3.5 and $5 million. Estate tax rates are also likely to increase.
• C corporation tax rates will likely increase from 21% to somewhere between 25% and 28%.
It appears as we get closer to the end of the year that the likelihood of these changes being retroactive are reducing.
Some thoughts on what you should do, assuming that our crystal ball is clear:
• Consider making large gifts prior to year-end to take advantage of the larger estate and gift tax exemption.
• Look into converting traditional IRA accounts into ROTH IRA accounts.
• Accelerate taxable income from 2022 to 2021.
• Defer major equipment purchases till 2022.
• Do not make your 4th quarter Illinois estimated tax payment till January 2022.
More to come as the bill progresses. If you have questions, please contact us at 847-240-1040 or contact us online.
