{"id":125813,"date":"2021-05-20T19:41:09","date_gmt":"2021-05-20T19:41:09","guid":{"rendered":"https:\/\/precoinnews.com\/?p=125813"},"modified":"2021-05-20T19:41:09","modified_gmt":"2021-05-20T19:41:09","slug":"bidens-plans-may-drop-a-tax-bomb-on-divorcing-couples","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/bidens-plans-may-drop-a-tax-bomb-on-divorcing-couples\/","title":{"rendered":"Biden\u2019s plans may drop a tax bomb on divorcing couples"},"content":{"rendered":"<ul>\n<li>President Joe Biden is calling for higher taxes on the wealthy to pay for the $1.8 trillion American Families Plan.<\/li>\n<li>The proposal includes a tax hike on top earners, up to 39.6% on regular income and capital gains.\u00a0\u00a0<\/li>\n<li>Financial experts say Biden\u2019s plans may drop a tax bomb on some divorcing spouses.<\/li>\n<\/ul>\n<p>There&#x27;s nothing easy about divorce, and President Joe Biden&#x27;s latest proposal may deliver a tax surprise to couples calling it quits.\u00a0<\/p>\n<p>Biden wants higher taxes on the wealthiest 1% to help fund education, paid leave, childcare and other social programs, impacting those earning over $400,000.<\/p>\n<p>The proposal calls for raising the highest income tax rate to 39.6%, a hike from the current 37%.<\/p>\n<p>Top earners may also pay nearly double on long-term capital gains, with an increase to 39.6% from 20%, not including the 3.8% Obamacare surcharge.<\/p>\n<p><strong>More from Personal Finance<\/strong><\/p>\n<p>How Biden&#x27;s real estate tax plan may hit smaller property investors<br \/>Biden&#x27;s plan for inherited real estate may impact more people than just the wealthy<br \/>How Biden&#x27;s capital gains proposal may hit middle-class home sellers in red-hot markets<\/p>\n<p>&quot;The repercussions of Joe Biden&#x27;s proposed tax plan are pretty significant,&quot; said certified financial planner Stacy Francis, president and CEO of Francis Financial in New York City.\u00a0<\/p>\n<p>Without strategic planning, the tax impacts may be drastic for divorcees, she said.\u00a0<\/p>\n<h2>Fewer assets to split<\/h2>\n<p>One of the biggest challenges for divorcees is paying for two households.<\/p>\n<p>Higher taxes means less cash flow to cover living expenses, said Aviva Pinto, managing director at Wealthspire Advisors in New York City.<\/p>\n<p>&quot;We see that after divorce, for men and women, the standard of living plummets,&quot; said Francis.\u00a0<\/p>\n<p>One spouse may have to sell the assets received in the divorce settlement to make ends meet, possibly triggering tax issues. <\/p>\n<p>For example, let&#x27;s say one spouse sells a $500,000 portfolio with significant gains from the past 15 years. <\/p>\n<p>The sale will greatly increase that spouse&#x27;s annual income, and may expose profits to Biden&#x27;s proposed 39.6% capital gains rate, Pinto said.<\/p>\n<h2>Home transfers<\/h2>\n<p>The proposed tax changes may also impact home transfers, said Eric Toya, a CFP and partner at Navigoe in Redondo Beach, California.<\/p>\n<p>For example, let&#x27;s say a divorcing couple bought a home decades ago in California for $250,000, and the property is now worth $1.7 million.\u00a0 \u00a0<\/p>\n<p>If the couple sells while married, they may qualify for a $500,000 tax break on the profit. But if one spouse sells it post-divorce, they may only get a $250,000 tax write-off.<\/p>\n<p>&quot;It&#x27;s one of those things that a lot of divorcing couples don&#x27;t think about,&quot; said Toya.<\/p>\n<p>Moreover, if that spouse sells the property for $1.7 million, they may push their annual income over $1 million, risking the higher tax rates on part of their home profit.\u00a0<\/p>\n<p>Combined with state taxes, the top capital gains rates could be over 50% in California, according to the Tax Foundation.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n<h2>Tips for divorcees<\/h2>\n<p>While the future of Biden&#x27;s proposals is unknown, Pinto said couples planning to split may consider finalizing their divorce before the new laws go into effect.<\/p>\n<p>&quot;Don&#x27;t let it drag on,&quot; she said. &quot;A lot of the courts are just opening, and there&#x27;s a huge backup.&quot;<\/p>\n<p>Divorcees also need to plan for the post-tax impacts of property transfers, such as investment portfolios or homes. They may need to consider the tax bite, especially for assets with significant gains, Pinto said.<\/p>\n<p>&quot;Fight for cash,&quot; she recommends.<\/p>\n<p>After divorce, a newly single investor often needs changes to their investment portfolio, said Francis. <\/p>\n<p>Those looking to swap out investments may dodge higher taxes on profits by making changes before the new laws, she said. <\/p>\n<p>&quot;So many times, people are just looking for the finish line of the divorce,&quot; Francis said. &quot;They don&#x27;t think about how they&#x27;re going to navigate their life afterward.&quot;<\/p>\n<p><\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/05\/20\/bidens-plans-may-drop-a-tax-bomb-on-divorcing-couples.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>President Joe Biden is calling for higher<\/p>\n","protected":false},"author":3,"featured_media":125812,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23051],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - 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