Curt Stoltzfus, CAP®, CFP®


Senior Financial Strategist


Coaching youth baseball is a passion of mine. I enjoy helping these aspiring youngsters become better baseball players. One thing I have learned over the years is that you need a solid defense to consistently win games.


In baseball, being a good defensive team means not only being physically able to make great plays, but each player must know where to go and where to throw the ball. Tere is a specific job for each player depending on where the ball is hit, whether it be covering a base or backing up a throw. Tis involves thinking ahead and having a plan for each unique situation. If a player is not prepared and in the right place at the right time, it could result in a missed opportunity to get an out.


Te same thing applies to financial planning in a changing tax environment. Taxpayers need to have an action plan and know where to go depending on the new rules of the tax game. Taxpayers who are not prepared and do not have an advisor to coach them may miss opportunities to reduce their tax bills.


With the change in administration in January, there is anticipation of a major tax overhaul in the coming months. Some of the proposals from the Biden administration include increasing the top ordinary income tax bracket back to the pre-Trump era rate of 39.6% or possibly even 45%. Eliminating the 20% Qualified Business Income deduction is also on the agenda, along with limiting itemized deductions to 28% of AGI. Overhauling retirement account contribution rules is also a target. Some of the proposals would replace the deductions taxpayers currently receive with a 26% tax credit.


Also on the agenda is increasing the capital gains tax rates. Some of the proposals increase the top capital gains rate to equal the top ordinary income tax rate (which could be up to 45%). Coupled with this is eliminating the stepped-up cost basis at death that appreciated assets currently receive. Tis, in essence, forces capital gains to be realized upon the death


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of the owner. Tis has the potential to have major impact on estate planning.


Other estate planning proposals include dramatically reducing the estate and gift tax exclusion amounts to $3,500,000 or lower (down from the current amount of $11,700,000).


Given the likelihood for a dramatic change in the tax landscape in the near future, we—like baseball players on the diamond— need to be thinking ahead and have a plan in mind for what we are going to do depending on which and to what degree these proposed changes are implemented. Using strategies such as income acceleration, excess retirement plan contributions, dividend reduction, capital gains budgeting, estate liquidity creation, charitable giving, and wealth replacement are going to be even more valuable under the increased-tax environment. Te value of tools like Donor Advised Funds, Charitable Remainder Trusts, and Charitable Lead Trusts will grow, as well.


Te team at Ambassador is prepared to advise you on where to be on the diamond, no matter which way the tax ball is hit.


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