Several developments over the past few weeks will have a significant impact on tax legislation and policy. In December, the Consolidated Appropriations Act, 2021 (Act) was signed into law, a $2.4 trillion legislative package that includes a number of provisions affecting individuals and businesses. Last month new members of Congress were sworn in, giving Democrats effective control of both the House of Representatives and the Senate. And, on January 20, President Joe Biden was sworn in as the 46th President, bringing with him a significant shift in tax policy and a broader impact as he plans his team across the executive agencies. Layering on top of the federal activity, the states are proposing legislative changes that may affect individuals subject to their income taxes.
Focusing in on proposals and developments that affect high net worth individuals can be challenging, especially while tax professionals also work to manage regular reporting and compliance requirements. Tracking, understanding, and applying them to unique tax circumstances should be done together with tax and estate planning professionals. The following highlights a few key proposals and developments that high net worth individuals should consider for both near-term and longer-term planning.
For a detailed analysis and understanding how the pandemic, economic challenges, and political divisions will drive tax legislation and other policy changes over the next two years, see PwC’s 2021 Tax Policy Outlook: The changing horizon.
President Biden has made clear that his initial priority is addressing COVID-relief, but his longer-term plans call for significant tax changes to support initiatives expected to be found in his Build Back Better Recovery Plan.
2021 will continue to be a dynamic year as federal and state governments navigate the fiscal challenges facing individuals, businesses, and governments. Legislation to address these challenges may be proposed, and for some individuals, this could result in higher taxes. Modeling and planning for these changes likely will be a significant part of 2021 for many taxpayers.
Personal Financial Services Leader, PwC US