AKM 2021-2022 Tax Guide Now Available

Making Sense of a Shifting Environment

Tax Planning Guide 2021-2022This year’s tax guide takes a careful look at a myriad of elements that can impact your tax liability, both for tax years 2021 and 2022 and in subsequent years.  A key theme is the ongoing impact of the “Tax Cuts and Jobs Act of 2017,” and what may happen when certain TCJA provisions expire in 2025.  The various COVID-19-related relief packages also figure heavily in many of the tax guide’s articles.

As usual, the tax guide was prepared by a trusted third-party provider and is intended to offer food for thought.  Please also note the short article we have prepared for the inside cover which addresses several issues clients have been asking about.  Your AKM CPA can help you evaluate your own circumstances and consider your best strategic options.

AKM Tax Guide 2020-2021

Contents of the 2021-2022 Tax Planning Guide

Income and deductions:  Careful planning is especially important this year [Page 2] – An overview of tax on ordinary income and the critical importance of timing both income and deductions.  The article notes some deduction categories that will have lower deductibility than in prior years.  It also discusses developments of particular interest to high earners, including the reduced peril of becoming subject to AMT and an additional .9% Medicare tax on net income over $200,000 ($250,000 for married filing jointly and $125,000 for married filing separately).   Helpful summaries:

  • Chart:  2021 standard deductions
  • Chart:  Itemized deductions also deductible for AMT purposes
  • Feature:  Overview of two new payroll tax breaks available to employers under COVID relief legislation

Executive Compensation:  Do you know the tax consequences of your exec comp package? [Page 6] – Strategies for crafting a tax-efficient total compensation package, including restricted stocks, RSUs, incentive stock options, nonqualified options and NQDCs.  Helpful summary:  

  • Case study:  Deferral opportunity available for stock-based compensation in certain situations

Investing:  Don’t let taxes erode your investment returns [Page 8] – A detailed summary of tax considerations when buying and selling investments, including an overview of capital gains tax and timing and a discussion of strategic use of losses.  Helpful summaries:  

  • Chart:  Maximum capital gains tax rates for 2021
  • Case study:  How to qualify for the 0% capital gains rate
  • Case study:  Mutual fund capital gains distribution:  a taxable event
  • Case study:  Tax-exempt or taxable bonds?  It’s a question of yield

Real Estate:  Saving taxes on your home and other real estate [Page 12] –  Overview of strategies for maximizing tax benefits of owning a principal residence, vacation home or rental property.  Helpful summaries:

  • Case study:  Reaping the benefits of bonus depreciation on QIP investments
  • Feature:  TCJA interest deduction rules return for 2021

Business ownership:  Keep your eye on your financial future while taking available tax breaks now [Page 14] – A discussion of the challenges business owners face in balancing the business’ income, expenses and tax breaks with plans for their individual financial futures.  Helpful summaries:

  • Feature:  Tighter limits on loss deductions are back
  • Chart:  Comparison of contribution limits of profit-sharing plan vs SEP

Charitable giving:  How to do well by doing good [Page 16] – A discussion of how to leverage the flexibility of charitable contributions in your tax planning, including summaries of substantiation requirements and donating appreciated assets.  There are also short explorations of making gifts over time and using charitable remainder trusts and charitable lead trusts  Helpful summaries:

  • Chart:  How much can itemizers deduct for their donations?
  • Feature:  CAA extends charitable donation deduction increases to 2021

Family and education:  Planning for children’s financial security [Page 18] – An overview of how families can put the younger generations on a sound financial footing.  Includes an exploration of the expanded child tax credit, tax liabilities on income earned by dependent children and the strategic use of IRAs to help put teens on the right financial track.  There’s also a longer discussion of various approaches to paying for higher education.  Helpful summary:

  • Feature:  Child and dependent care breaks expanded for 2021

Retirement:  Make the most of tax-advantaged retirement plans [Page 20] – An overview of retirement plan contribution strategies, the benefits of converting to a Roth IRA and the penalties associated with early withdrawals.  Helpful summaries:

  • Chart:  Retirement plan contribution limits
  • Feature:  Taking advantage of tax breaks on COVID-19 distributions

Estate planning:  Today’s tax savings may not be available tomorrow [Page 22] – Discussion of record-high exemptions created by the “Tax Cuts and Jobs Act of 2017,” and when those exemptions are expected to revert to lower amounts. Also includes summaries of state tax issues, how to time gifts and the portability of various exemptions.  Helpful summaries:

  • Chart:  2021 transfer tax exemptions and rates
  • Case study:  2021 might be a good year to make “taxable” gifts

Tax rates [Page 24] – 2021 individual, corporate and trusts and estates income tax rate schedules.

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