The possibility of tax increases have some business owners thinking seriously about selling their businesses as soon as possible. We wrote about some of the potential changes in a recent article, which you can read here: How Proposed Tax Code Changes Could Impact the Sale of Your Business. Let’s take a closer look at some of the specific proposed changes, their potential ramifications, and some financial planning strategies you may be able to use to help mitigate them.
Proposed Changes
Increase Long Term Capital Gains Rate to 39.6%
Note: Business owners looking to sell must be very careful, especially if you have good profits every year, it’s not hard to hit that $1 million dollar mark. So, you’re definitely going to need to do some planning to try to stay under that threshold.
Possible Strategies
Proposed Changes
Social security tax to be paid on annual wages above $400,000
Possible Strategies
In lieu of compensation, provide:
Proposed Changes
Raises top marginal rate from 37% to 39.6%
Possible Strategies
As you know, taxes are a very complicated area, and the sale or transfer of a business adds a whole other level of complexity. Our possible strategies to mitigate your liability are only suggestions and are not tax advice. You should always work with your trusted advisors and tax experts who are familiar with your circumstances before making any major business or financial decisions. It pays to understand all of the potential changes and how they may impact you and the sale of your business.
In the next installment of this series, we will discuss Transfers of Appreciated Property or “Deemed Sales,” Gifting and Estate Tax Changes, and other proposed tax changes. In the meantime, if you have any questions, we invite you to schedule a complimentary call with us. We’re here to help.
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