Stocks Break Record, But Smart Money Is Focused On Taxes

Published Friday, November 13, 2020 at: 6:40 PM EST

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The precise tax hikes coming in 2021 are unclear. Nonetheless, proactive tax planning is urgent for high-net worth individuals and high-income earners.

Year-end tax planning is normally a routine affair, but 2020 is a year-end tax planning season like no other.  The stakes are high for certain individuals.

In an era of expanded Presidential authority, some tax hikes could be implemented in a Biden Administration with executive order. While Congress is given the power of the purse in the Constitution, the Biden Administration will be under pressure to raise revenue.

The U.S. balance sheet was unexpectedly weakened in 2020 by an explosion in the federal deficit to pay for $2.2 trillion in Covid relief to individuals and businesses. Another relief package is widely expected by the end of February 2021 to further erode the nation's financial condition.

The current estate tax exemption of $11.58 million for individuals ($23 million per married couple) would be lowered to $3.5 million ($7 million for a couple) under President-Elect Biden's tax plan. Earning more than $400,000 in income could be subject to federal payroll tax of 12.4%. There's about a 25% chance of sweeping tax hikes in 2021.

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The Standard & Poor's 500 stock index closed Friday at 3,585.15, surging +1.36% from Thursday, +2.13% from a week ago, and +46.29% from its March 23rd bear market low.

The index closed at a new all-time high, breaking the previous all-time high set in early-September.

Stock prices have swung wildly since the coronavirus crisis started in February and volatility is expected in the months ahead.


Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial or tax situation, or particular needs. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. The material represents an assessment of financial, economic and tax law at a specific point in time and is not a guarantee of future results.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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