The New Normal

The start of a new year is a great time to renew your focus on the journey from success to significance.

As we come to the end of what seems like the longest political cycle in recent memory, with the shift in control of Congress from Republicans to Democrats, near-term tax implications and long-term estate plans may require some new considerations. The wealth advisors at Mosaic Family Wealth are prepared to answer questions you might have to help ensure that your long-term strategies are still in focus.

The Biden Administration campaigned in part on tax policy ideas that would result in higher tax bills for large corporations and wealthy individuals. Democratic leadership in the 117th Congress, including control of the influential tax-writing committees in both chambers, means that Biden will have a less obstructed path towards making some substantial tax policy changes.

As we shared back in November, our team is monitoring some key policy areas to ensure that we can provide ongoing guidance, allowing you to preserve the value of your investments and maximize your legacy to future generations. Here is an update based on a Democrat-led Congress:

  • Proposed Income Tax Increases — The President Elect has stated that he would like to increase taxes for those individuals who make more than $400,000 a year. With the Democrats taking over control of the Senate, there is a greater likelihood these types of changes could occur. Also keep in mind that under the Budget Reconciliation process, tax legislation may be passed with a simple majority instead of the usual 60% approval requirement. Tax changes that have been discussed include:
    • Extending the Social Security tax to any earnings over $400k. Under current law only wages under $137,700 are assessed Social Security tax.
    • Increase the top income tax bracket to 39.6% from the current 37%.
    • Bump capital gains rates to 39.6% for anyone with an income of $1 million or more. The current top capital gains rate is 20%.
  • Estate/Gift Tax — This is sure to be on the top of the agenda for the new Administration and should have Congressional backing. Democrats have discussed reducing this exemption to the $3.5 million “historical norms” of 2009, which would be dramatic change. As this issue comes up for discussion, our advisors will provide ongoing guidance on how to best deal with any changes that may affect your long-term goals.
  • Income Tax Basis Step-Up — It seems unlikely that the Biden Administration will seek to repeal the step-up basis, which provides for fair market valuation of assets at death, reducing tax liability to beneficiaries. Despite the “Tax the Rich” rhetoric that was heard throughout the campaign season, broad support among Americans for this type of change doesn’t seem to be there yet, making it unlikely that this type of legislation will garner interest with the current Congress.
  • Annual Exclusion Gifts — The Biden Administration is likely to pursue a significant reduction in the amount of estate and gift exemptions, potentially suggesting a cap on the total annual amount in any one year at $50,000. However, this may not be an immediate legislative priority. For now, the 2021 Tax Code exclusion remains the same at $15,000 and allows married couples to make non-taxable gifts (in cash or in kind) with a fair market value of $30,000 per individual annually.

In our highly connected, digital world, you are likely to hear about all sorts of policy proposals making the rounds in Washington, particularly in the next few months as the new President works to make a big impact in his first 100 days in office, as is tradition. This is the standard way that Washington operates and nothing that should cause undue stress.

Your front-line for understanding the repercussions of any changes are the team members at Mosaic Family Wealth. We are continually evaluating the environment and crafting strategies and guidance that will deliver the strongest opportunities for our clients.


Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice. If you would like investment, accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs.

Mosaic Family Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Mosaic Family Wealth, LLC and its representatives are properly licensed or exempt from licensure.