At a two-day year end tax update last week, the instructor spent more than half our time on new developments. The 700-page, bound workbook was printed months ago, so the speaker had to develop dozens of [not-in-book] presentation pages, copies of which he promised to send later via email in pdf. My point is, moving targets are hard to hit. With six weeks left in the year the tax rules are still changing. It reminds me of the saying, “That is no way to run a railroad.”

I have lamented for decades that the tax law for any given year should be set and unchangeable on January 1. But, that is too logical and simple and beyond the comprehension of politicians in Washington D.C.

I have nightmares when I think about last tax season. Congress passed three laws in 2021 that affected 2020 tax returns of most Americans. Let me state that again. The calendar year ended, millions of tax returns were filed and then the tax laws changed, three times! How absurd!

Shortly after President Biden’s inauguration, he released a wish list of tax increases that I highlighted in my March article. Fortunately, they have not become law. The TCJA (Tax Cuts & Jobs Act) is effective through 2025.

The following tax changes were proposed by "Emperor" Biden:

1. Increase the social security wage base to $400,000 (which would increase the SS tax by about $16,000 for an employee with W-2 wages of $400,000),

2. increase the top tax bracket from 37% to 39.6%,

3. lower the AMT (Alternative Minimum Tax) threshold forcing more middle class Americans to pay AMT,

4. eliminate the deduction for qualified business income (QBI),

5. increase the capital gains tax rate from 20% to 39.6% (on qualifying income in excess of $1 million),

6. ultimately raise corporate income taxes from 21% to 35%,

7. implement a corporate minimum tax of 15% even if a corporation shows a net loss,

8. eliminate like-kind exchanges (IRC Section 1031),

9. limit Itemized Deductions to 28% (currently 60%) of adjusted gross income (AGI),

10. eliminate the step-up in basis for inherited assets, and

11. greatly reduce the estate tax exclusion.

Months later, he proposed a bizarre tax on unrealized capital gains, which would levy annual income taxes on investments (like stocks, bonds, mutual funds, real property, and even artwork). Thankfully, these proposed tax changes have almost no chance of becoming part of the official tax code.

However, Congress did pass several new laws (in 2019, 2020 and 2021), which have tax implications, in efforts to ameliorate the ravages of COVID.

1. CAA (Consolidated Appropriations Act of 2021, Dec. 27, 2020) sought to alleviate economic misfortunes related to COVID-19.

2. ARPA (American Rescue Plan Act, Mar. 11, 2021) provides relief related to COVID.

3. CARES (Coronavirus Aid, Relief, and Economic Security Act, Mar. 27, 2021) provided COVID relief in three key areas: 1) unemployment assistance, 2) access to healthcare for COVID patients, and 3) guaranteed loans to small businesses to help them pay wages and other expenses.

4. FCAA (Further Consolidated Appropriations Act of 2020, Dec. 20, 2019) included the SECURE Act, which was identified separately.

5. SECURE (Setting Every Community Up for Retirement Enhancement Act, Dec. 20, 2019) was passed as part of the FCAA. Major changes include: 1) increased Required Minimum Distributions from age 70.5 to 72, 2) allowed employees over age 70.5 to make traditional IRA contributions, and 3) allowed disaster relief by offering “qualified disaster distributions” from retirement accounts to participants who suffered economic loss from a disaster and eliminated the 10% penalty for a premature distribution. The applicable income tax may be spread over three years.

6. FFCRA (Families First Coronavirus Response Act, Mar. 18, 2020) included several relief provisions related to COVID. It required employers to provide Emergency Paid Sick Leave (EPSL), but also provided employers to recover 100% of the EPSL through refundable payroll tax credits. It also required employers to provide Emergency Family and Medical Leave (EFML), but also provided employers to recover 100% through tax credits.

Finally, here are some tax savings strategies that could be implemented before year end. (Most also were available last year.)

1. A charitable contribution deduction up to $300 ($600 MFJ) is allowed without itemizing.

2. Consider a Roth conversion from a traditional IRA if your 2021 income is less than usual (to save taxes in retirement).

3. Charitably inclined retirees should consider a Qualified Charitable Distribution (QCD). Required minimum distributions (RMD) up to $100,000 per year can avoid tax if you have your IRA custodian issue a check directly to your favorite charity.

4. Taxpayers who used to itemize (before TCJA) could benefit by alternating every year between the standard and itemized deductions. Prepay (or post-pay) certain items, like taxes, charity, etc. one year, and claim the standard deduction the next.

5. Business owners who received PPP Loans need to formally request forgiveness. The Employer Retention Credit (ERC) is available if nonrelatives were employed. The same payroll expenses cannot be claimed for both the PPP and ERC, but one starts where the other ends.

6. If selling appreciated assets or investments, take advantage of the 0% capital gain rate, which is effective up to the start of the 22% tax bracket as follows: Single $45,525, Head of Household $54,200, and Married Filing Jointly $81,050 for the 2021 tax year.

7. Business owners and farmers can deduct the entire purchase price of an asset by taking bonus depreciation if placed in service before year end.

Before selling large highly appreciated assets, you might want to explore uncommon tax reduction strategies by seeking advice from a Certified Tax Strategist.

Aric Schreiner, CPA, PFS, Certified Tax Strategist, helps successful professionals and small business owners strategize to reduce taxes and audit risk.

This article originally appeared on Columbia Daily Tribune: Tame Your Taxes: 2021 tax changes and year end tax tips