This episode, I decided to take a break from our normal Equity Compensation topics to cover something that’s happened in the U.S. that we all need to at least be aware of. What is it? The proposed tax changes we’ve all expected are finally unveiled and there are some stunners in the mix. The reasons behind these dramatic changes will become more clear in the weeks to come In this episode, I go through the basics on a high level and venture a few opinions as well. In the end, if you feel these changes are relevant to you, seek advice from your CPA or Tax Attorney.
You will want to hear this episode if you are interested in...
The proposed U.S. tax changes are here. Oh boy!
The tax changes that are coming down the pike apply to single income earners whose income is at or above $400,000 and married filing jointly income earners whose income is at least $450,000. The changes are many…
And the change to top them all…
Wow! That’s a huge change for people in higher income brackets. It’s doubtful that these proposed changes will make it through the Congressional process intact, but some form of what I’ve listed here is going to become a reality.
Back door Roth IRAs will be eliminated for everyone beginning in 2022
There are changes as well, one of the main modifications being that the back door Roth IRA contribution will become a thing of the past. If you’re not familiar with a backdoor Roth IRA, it’s the name for a legal method for high-income taxpayers to fund a Roth, even if their incomes exceed the limits for regular Roth contributions.
Corporate tax rates will go from a flat 21% to a progressive rate up to 26.5%
The tax changes proposed also include an increase in corporate tax rates (C corps). This increase does away with the flat tax business have enjoyed for a number of years and increases it at the same time. C Corps will pay up to 26.5% under the new legislation, if it passes.
This week’s FLASHBACK:
The first time I learned about interest rates: I was driving with my Dad in my hometown and I saw a lot of tents outside the bank. He explained that people were camping out to get a lower interest rate for mortgages. It was an adult level concept that I began thinking about at the time.
I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.