What does a Biden White House mean for property taxes?
Now that the transition to a Biden White House has officially begun, what will his presidency mean for property taxes? Many people have been donating like crazy in recent months in anticipation of a possible blue wave in the November election. The concern was that if Democrats controlled the White House and both houses of Congress, Democrats would roll back Trump’s 2017 tax bill and reduce the lifetime estate tax exemption (currently set at $11,580,000 ). The blue wave didn’t happen, so where are we now?
Biden will soon be in the White House and Democrats will control the House of Representatives, but control of the Senate is still unclear. Georgia’s two Senate seats (currently held by Republicans) are still up for grabs and will be determined in a runoff in January.
After the November election, Republicans now have 50 Senate seats and Democrats 48. Democrats must win both seats in Georgia to gain control (Kamala Harris as the new vice president would break the tie). Anything less for Democrats would mean Republican control of the Senate.
Regardless of who controls the Senate, tax reform is unlikely to be at the top of Biden’s agenda. COVID control will be the first task of the new administration. Could tax reform be next on the agenda if Democrats control the Senate? Possibly, although that’s unlikely given the other platforms Biden has operated on. Biden may be more inclined to address issues that address his supporters’ concerns such as Medicare and the environment rather than tackling tax reform outright. Plus, he has to work to heal our nation, and tax reform usually doesn’t.
If Republicans control the Senate, tax reform is even less likely. Although at some point someone will have to pay for all the COVID relief the government has disbursed, so some form of compromised tax bill could arise in the future. And what better way to generate income than to go after the money of the dead? If the tax reform comes in 2021, many believe it will happen towards the end of the year and come into effect in 2022.
This means you may have an extra year (or more) to make these donations. If Congress does nothing to change the tax laws, the current lifetime exemption amount of $11 million (adjusted annually for inflation) granted by Trump’s 2017 federal tax law overhaul is expected to expire in 2026. The amount will then drop back down to $5 million. (also adjusted for inflation). This could give you an additional five years to make your donations.
Keep in mind that Biden’s campaign website didn’t actually list his proposal for a new estate tax exemption amount. Many Democrats vying for the nomination have advocated a $3,500,000 estate tax exemption. Additionally, the Tax Policy Center estimated that Biden’s plan would reduce the exemption to $3,500,000. Even though that number has come up, we don’t know what number Biden or his team actually have in mind. Or what the real number will be after all the behind-the-scenes politics going on.
Is tax reform possible in 2021? Yes. If nothing else, the past four years have shown us that anything is possible in American politics. However, you may have an extra cushion of time to do your goodies.
If you were thinking about donating and didn’t pull the trigger this year, you might want to reconsider your decision in the new year. If you want to lock in your exemption amount this year, don’t delay. Many estate planners, overwhelmed with clients seeking to donate, impose deadlines after which they will no longer respond to client donation requests.