Today’s year-end planning tip is regarding an Overview of Trumps proposed tax policies:
This is just general knowledge that may be helpful in in considering your strategy for the year-ahead.
So, President-elect Donald Trump’s Republican victory will help him drive his agenda through Congress. These are some topics that he discussed on the campaign trail and are worth keeping an eye on…
First, Income taxes. Trump has expressed support for extending the income tax provisions on a short-term basis as Congress debates a larger tax-reform package. That could mean federal tax brackets would stay where they are today, with a top marginal rate of 37%. The SALT deduction cap and elimination of personal exemptions might also be reconsidered as part of congressional negotiations.
Qualified dividends and capital gains rates. The TCJA lowered taxes on long-term capital gains by setting up separate tax brackets for assets held longer than 1 year and for qualifying dividends, though the rates remained the same at 0%, 15%, and 20%. The act also retained the 3.8% net investment income tax for higher-income people. There has been some discussion among Republican tax policy experts about making the top rate 15% and eliminating the net investment income tax.
Child Tax Credit. Vice President-elect JD Vance has expressed support for increasing the credit to $5,000 per child.
Caregiver credit. In a speech at Madison Square Garden in October, Trump proposed a new tax credit for family caregivers taking care of a parent or loved one.
Estate taxes. Trump has expressed support for extending the 2017 TCJA changes to the estate tax exemption, which doubled to their existing levels of $13.61 million for single people and $27.22 million for couples compared to 2016.
As I mentioned, without an extension, the estate tax would return to its pre-2017 levels which is approximately half of what it is today…
Social Security benefits. Trump has proposed eliminating all taxes on Social Security benefits. Currently up to 85% of benefits are taxed for a single filer with income above $34,000 or a married filing jointly couple with combined income of $44,000.
Corporate taxes. Trump has expressed support for lowering corporate taxes to 15% from their current 21% rate.
Tariffs: President Trump is a self-described “Tariff Man” where he will use tariffs to punish countries who are not playing fairly and to protect American products. I have little doubt that he will assess Tariffs, especially to a country like China who steels intellectual property and seems to play by their own rules.
And Here’s a Practical Planning Tip: When it comes to taxes, remember that the future is unpredictable. While we assume Trump will LOWER taxes, tax policy is still uncertain. Therefore, embracing an approach of PROACTIVE tax mitigation strategies, like the items I mentioned, makes sense.
In terms of tariffs, the stock market is the best way to outpace the inflationary environment that may be caused by tariffs. Make sure to incorporate that into your portfolio.