Biden infrastructure bill could bring tax changes that would affect El Pasoans

EL PASO, Texas - Lawmakers in Washington are still wrangling over President Biden's $3.5 trillion proposed social spending bill. If the plan is passed, it could change the top company and individual tax rates, reversing some pieces of the Tax Cuts & Jobs Act law that went into effect in 2017. 

Local financial professional Brian Mirau of Mirau Capital Management appeared on ABC-7 at Four Wednesday to discuss the effects of some of the changes.

"One of the proposed changes impacts corporate and individual tax rates," Mirau said. "The corporate tax rate would jump from the current 21% to 26.5% from 21%."

Another change would potentially affect small business owners in El Paso. "For individuals who earn more than $400,000 per year and married couples earning more than $450,000 per year, they would see their top tax rate increase from 37% to 39.6%," said Mirau.

Mirau has some suggestions to help investors prepare their nest egg ahead of these potential changes.

Diversify Your Investments

• Investing in a diversified portfolio, where your money is spread into different types of investments, means all of your investments are not tied up in one individual asset, like a home or land.
• Your investments should be diversified and have the appropriate risk for your age and how close you are to retirement. 
• Consider having both tax-deferred and tax-exempt accounts. Tax-deferred accounts, like your 401(k) and traditional IRA, offer tax advantages now.
• Tax-exempt accounts like a Roth IRA are often ignored because the tax benefits come later in life. The money you contribute to a Roth IRA is taxed now, but you can withdraw from these accounts tax-free in retirement. 

Maximize Investment Losses

• Underperforming stocks in your portfolio can serve as a tax break.
• Tax-loss harvesting is a strategy some investors can use to sell investments at a loss to help offset the taxes you have to pay on your gains.
• Tax-loss harvesting can only be done with taxable investment accounts. You can’t use losses from retirement accounts like traditional IRAs, Roth IRAs, 401(k)s and 403bs.
• However, don’t sell stocks at random.

Plan Year-Round

• According to a recent survey, nearly half of people who have retired within the last ten years wish they had planned better for taxes.
• That’s likely because one in four retirees reported paying thousands of dollars more in taxes in retirement than they had expected. 
• Utilizing various tax planning strategies during your working years will help keep your tax burden manageable during your golden years. 

Mirau says if you have concerns about how tax changes could impact your financial future, speak with a financial professional.