12 Tax Angles For Investors: What Will Survive The Democratic Congress?

Tax-hungry legislators may go after incomes over $400,000. But they will likely leave in place a rich collection of avoidance devices. Here are ways that investors minimize damage from the IRS.

Democrats, narrowly in control of Congress, are equipped to undo parts of the 2017 Trump tax cut and, perhaps, to attack some of the long-standing tax lowering schemes that investors use. But most tax-wise investing strategies will probably survive.

This is partly because more than a few dodges have big fan bases among the voters. There are 14 million Section 529 college savings accounts. What legislator would dare rip those accounts up?

Then there is the matter of the details of anything called a tax reform. You could make a theoretical case for taxing capital appreciation before an asset is sold. But implementing a mark-to-market scheme would be a nightmare of complexity, at least if any effort were made to keep very wealthy people from using loopholes that would be beyond the reach of the middle class.

For raising good revenue with minimal messiness, nothing beats a simple bracket change. Joseph D. Roberts, a senior wealth strategist at Rockefeller Capital Management, sees Congress looking first at these changes: increasing the top bracket from 37% to 39.8%, increasing the corporate rate from 21% to 28%, lowering the estate tax exemption to where it was before the 2017 tax cut. He says it’s unlikely that these hikes will be retroactive.

If this is the route the tax writers take, there will be left in place numerous opportunities for savers to protect their capital. We survey 12 tax techniques. Here is the table of contents.


There are two ways to duck capital gain taxes via an intra-family transfer. One is to give appreciated shares to a low-bracket relative who then sells. The other is to give the stock to an elderly relative who bequeaths it back to the donor, thereby capturing the step-up at death. To use either of these schemes you must know how to avoid certain pitfalls.


Money compounds tax-free in these accounts, provided that it’s used for things like tuition, room and board. Some agility is needed to keep the savings safe from financial aid formulas.


Pay tax on your retirement sooner than you have to—and you’ll come out ahead surprisingly often. We have a calculator for the arithmetic.


Portfolios are all about location, location, location. Move junk bonds and commodity funds out of your taxable account into your IRA. Go the other way with your stocks, especially foreign stocks.


Qualified Charitable Distributions have the effect of giving you a deduction for charity, even when you don’t itemize deductions. This chapter explains the how and why


Moonlighters get magically enabled write-offs, a 20% pass-through deduction via the Trump tax cut and a powerful object called the solo 401(k).



Your objective, when capturing capital losses, is to be able to enjoy appreciation in your portfolio while telling the IRS that you are losing money on it.


Stuff charitable deductions into one year while taking standard deductions in the other years. Donor-advised funds make this timing graceful.


A triple play in taxes: the Health Savings Account. You can turn one into a sort of supercharged retirement account.


Extract the most from employee options while dodging the worst of the alternative minimum tax.


You can get a tax-free bang from a small number of bucks by investing in a corporation when it’s small. Section 1202 is how people get rich in Silicon Valley.


Buy a deferred annuity with some of your retirement money: The Qualified Longevity Annuity Contract enhances your IRA’s tax deferral and increases your ability to take chances with the rest of your savings.


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