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Tax Planning for the Biden Administration

September 27, 2021

Potential Strategies to Combat Increased Taxes

Many individuals are stuck in a holding pattern as they wait to see what impact the Biden Administration will have on tax regulations. The President has shared what he’d like to see happen, but until those proposals are put into law, it can be hard to know what strategies to take — if any. Currently, the potential changes will only impact salary earners making $400k or more.

From a pure tax planning perspective, no changes to current regulations would be ideal, but even knowing what changes to expect would put filers in a better position, whereas new regulations in late 2021 would offer little opportunity to take action to offset rising taxes.

In several articles, Jeffrey Levine, CFP®, CPA discussed the proposed tax changes and potential strategies to combat any adverse effects. Levine is the CPO of Buckingham Wealth Partners and the Lead Financial Planning Nerd for the popular financial website Here are just a few of the more significant changes that could impact your net income going forward.


If the Biden Administration has their way, an annual income of over $400k will propel individuals and those who are married and filing jointly into a 39.6% tax bracket as compared to the current 35% bracket.

Potential Planning Strategies:

  • Accelerating Income - To offset a potentially higher tax bracket, Levine recommends taking advantage of current tax laws while they last. That means accelerating income in 2021. You may have a higher tax bill this year, but you could counterbalance even greater tax liabilities down the road.
    If you’re a small business owner, you may be in a better position than some to accelerate income and put off anticipated business costs to 2022. That way you’ll have more deductions to compensate for a potentially higher tax bracket next year. There is one caveat to this approach, however. That’s the potential for the Biden Administration to put a cap of 28% on potential itemized deductions. If this piece of legislation goes through, then taking partial deductions this year may also be necessary to maximize your ability to write off expenses.
  • Roth Conversions - Converting a traditional IRA or 401(k) into a Roth IRA is one way you can capitalize on a lower tax bracket now if you’re an over $400k earner. Then, if taxes are increased in the future, you’ll already have your assets converted to a tax-free account.

Prohibition On Conversions of After-Tax Amounts

The proposed legislation would prohibit conversions of after-tax dollars held in retirement accounts (both IRAs and employer-sponsored retirement plans) beginning in 2022. As a result, the popular “Backdoor Roth IRA” strategy will be gone.

If this provision is enacted, it would create a need for a fresh look at the convert-or-not decision for savers with after-tax dollars in retirement accounts. While such individuals, particularly IRA owners, may have been waiting for the optimal time at which to make a conversion, the choice may soon be now or never (at least with respect to the after-tax dollars in their account).

Potential Planning Strategies:

  • Implement your “backdoor Roth IRA” for 2021 before a possible shutdown of the strategy.
  • If you have after-tax dollars in an IRA, assess if now is the appropriate time to convert them to a Roth account.


Those earning over $1 million a year could end up paying ordinary income tax rates on long-term capital gains and qualified dividends.

Potential Planning Strategies:

  • Investments with Little Tax Implications: Levine recommends looking for minimal tax investments like municipal bonds, avoiding investments that produce dividends and regulating annual sales to stay under the $1 million cap as just a few ways to help minimize your tax liability.


Another proposal that’s looming on the horizon is the reduction of the estate and gift planning exemptions put into effect during the Trump presidency. Current rules allow for $11.58 million in tax-exempt wealth transfer per person, whereas proposed changes will revert that amount to approximately $5.85 million per person.

Potential Planning Strategies:

  • Maximizing Gifts in 2021: One option, per Levine, is to take advantage of the current rate and donate $11.58 million per individual this year. That’s a solution that takes careful planning — especially for those whose assets are tied up in a business or those with barely enough assets to cover the gift and have enough to live on for the remainder of their lives.
  • “Stretch” Donations for Couples: Another strategy is to max out your gift this year, while your spouse waits until later. You’ll donate $11.58 million, and then if the exemption goes down, your spouse will still be able to gift $5.85 million later. If you split the $11.58M evenly this year and the exemption goes down, you’ll each have effectively eliminated any opportunity for more gifting in later years.


So how do you plan for taxes when you don’t know what regulations will change if any? It’s a question on the minds of many investors trying to maximize their net revenue. On the one hand, if President Biden’s tax proposals don’t go into effect, you might make unnecessary changes that could trigger additional taxes. On the other hand, if the proposals become law, you could regret not acting while you’re in a more optimal tax situation.


We can help you make sense of the planning options available to help offset anticipated increases during the next presidential term — and whether you should act now or stay the course. Timing is everything when it comes to taxes, so contact us today to schedule an appointment!


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