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What the 2024 Presidential Election Could Mean for Your Taxes

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As we approach the 2024 presidential election, taxpayers are paying close attention to the tax policies proposed by the candidates. The outcome of the election could significantly impact your financial planning, tax rates, and deductions. Here's an overview of the key tax proposals from the major candidates and what they could mean for your taxes.

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Democratic Candidate: Kamala Harris

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Source: Wikipedia

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Kamala Harris, the Democratic candidate, has proposed several changes aimed at increasing taxes on high-income earners while expanding benefits for middle and lower-income families. Her proposals are designed to create a more progressive tax system and address income inequality. Here’s a closer look at her key tax policies:

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1. Increasing Taxes on High-Income Earners:

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• Income Tax Rates: Harris proposes increasing the top individual income tax rate to 39.6% for those earning over $400,000. This is a return to the pre-2018 top rate, which was lowered under the Tax Cuts and Jobs Act (TCJA). The goal is to ensure that high earners contribute a fair share to federal revenues.

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• Capital Gains Tax: For households making over $1 million, long-term capital gains and qualified dividends would be taxed at the same rate as ordinary income. This could result in a significant increase in taxes for high-income investors, as long-term capital gains are currently taxed at a lower rate.

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• Corporate Tax Rate: Harris plans to raise the corporate tax rate from 21% to 28%. This increase aims to generate additional revenue from corporations and reverse part of the corporate tax cuts introduced by the TCJA.

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2. Expanding Tax Credits and Deductions:

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• Child Tax Credit: The expanded Child Tax Credit, which provides up to $3,600 per child, could become permanent under Harris's administration. This policy aims to reduce child poverty and provide financial relief to families.

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• Earned Income Tax Credit: Harris aims to expand the Earned Income Tax Credit to include more childless workers, enhancing support for low-income individuals and incentivizing work.

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• First-Time Homebuyer Credit: A new refundable credit of up to $15,000 for first-time homebuyers is on the agenda. This credit would help more Americans achieve homeownership, particularly young adults and families.

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3. Adjustments to Deductions and Limitations:

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• Itemized Deductions Cap: Harris proposes capping itemized deductions for high-income earners at 28%. This means that taxpayers in higher tax brackets would get less benefit from their deductions, making the tax system more progressive.

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• Social Security Taxes: High-income earners may face additional Social Security taxes on income above $400,000. This policy aims to strengthen the Social Security system and ensure its long-term viability.

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Republican Candidate: Donald Trump

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Source: Wikipedia 

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Donald Trump, the Republican candidate, has a different approach to tax policy. His focus is on extending the tax cuts introduced under the TCJA and further reducing corporate and investment taxes to stimulate economic growth. Here’s an outline of Trump’s key tax proposals:

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1. Extending the Tax Cuts and Jobs Act (TCJA):

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• Individual Income Tax Rates: Trump plans to extend the individual income tax cuts introduced under the TCJA, which are set to expire in 2025. These cuts reduced tax rates across all income brackets, with the aim of boosting disposable income and economic activity.

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• Standard Deduction: Maintaining the doubled standard deduction from the TCJA remains a priority. The higher standard deduction simplifies tax filing and benefits taxpayers who do not itemize deductions.

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• Alternative Minimum Tax (AMT): Trump aims to continue the increased exemption amounts for the AMT. This reduces the number of taxpayers subject to the AMT, which is designed to ensure that high-income individuals pay a minimum amount of tax.

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2. Reducing Corporate and Investment Taxes:

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• Corporate Tax Rate: Trump has suggested further reducing the corporate tax rate to below 21%. Lower corporate taxes are intended to encourage business investment and economic growth.

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• Capital Gains Tax: Proposals include reducing the long-term capital gains tax rate and indexing capital gains to inflation. Indexing would adjust the cost basis of an asset for inflation, potentially reducing the taxable gain when the asset is sold.

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3. Promoting Savings and Investments:

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• Tax-Free Savings Accounts: Trump proposes expanding tax-advantaged savings accounts to encourage more Americans to save and invest. This could include increasing contribution limits and creating new types of accounts.

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• Opportunity Zones: Continuing the Opportunity Zones initiative to promote investment in economically distressed areas is a key component of Trump’s tax plan. Opportunity Zones offer tax incentives for investments in designated low-income areas, aiming to spur economic development and job creation.

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Independent Candidate: A Third Option?

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While the Democratic and Republican candidates dominate the spotlight, independent candidates can also influence the tax policy debate. These candidates may offer alternative tax proposals, which can include ideas such as simplifying the tax code, implementing a flat tax rate, or introducing new forms of taxation. Here are some potential proposals from independent candidates:

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1) Simplifying the Tax Code:

Many independent candidates advocate for a simpler tax code with fewer deductions, credits, and loopholes. Simplification could make tax filing easier for individuals and businesses and reduce compliance costs.

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2) Implementing a Flat Tax Rate:

Some independent candidates propose a flat tax rate, where all taxpayers pay the same percentage of their income, regardless of earnings. This approach aims to create a more straightforward and transparent tax system.

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3) Introducing New Forms of Taxation:

Independent candidates may also suggest new forms of taxation, such as a wealth tax or a financial transactions tax. A wealth tax would levy taxes on the net worth of high-income individuals, while a financial transactions tax would impose a small tax on trades of stocks, bonds, and other financial instruments.

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What This Means for You:

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The outcome of the 2024 presidential election could have a profound effect on your taxes and overall financial planning. Whether it's higher taxes on the wealthy, expanded credits for families, or continued tax cuts from the TCJA, it's crucial to stay informed and prepared for potential changes. Here are some steps you can take to navigate the evolving tax landscape:

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1) Review Your Financial Plan

Assess how potential tax changes could impact your income, investments, and estate planning. Consider working with a financial advisor to adjust your strategies accordingly.

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2) Stay Informed

Follow the candidates’ tax proposals and analyze how they align with your financial goals. Keep up with news and expert analyses to understand the implications of each policy.

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3) Consider Tax-Efficient Investments

Explore tax-advantaged accounts and investment strategies that can help minimize your tax liability. Options may include retirement accounts, municipal bonds, and tax-efficient mutual funds.

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4) Plan for Potential Deductions and Credits

Take advantage of current deductions and credits while they are available. Be aware of changes that could affect your eligibility or the benefits you receive.

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5) Be Prepared for Legislative Changes:

Understand that tax policies can evolve even after the election. Stay flexible and be ready to adapt your financial plan as new laws are enacted and regulations are issued.

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Conclusion

The 2024 presidential election will have significant implications for your taxes, depending on which candidate's policies are enacted. Whether it's increasing taxes on high-income earners, expanding tax credits for families, or extending the benefits of the TCJA, each proposal will shape the financial landscape for years to come. 

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As the election approaches, it's crucial to stay informed and consider how these potential changes could affect your financial planning and tax strategies. By understanding the candidates' tax policies and preparing for potential changes, you can make informed decisions and ensure your financial well-being in the years ahead.

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By understanding the candidates' tax policies, you can better prepare for the potential changes that may arise from the 2024 presidential election. Stay informed, plan ahead, and ensure your financial strategies are aligned with the evolving tax landscape.

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I hope this information was helpful! If you have any questions, feel free to reach out to us here. I’d be happy to chat with you. 

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Vincere Tax can help you with the tax implications of business taxes, stocks, bonds, ETFs, cryptocurrency, rental property income, and other investments. 

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Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!

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‍This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.