Whether you’re ready or not, another presidential election season is upon us. For many Americans, the state of the economy is a primary concern when assessing candidates. However, even if you don’t plan to vote, the tax policies implemented by the next administration could significantly affect your personal wealth and estate planning strategies.
Upcoming Tax Legislation
The 2024 election is poised to influence tax policy significantly. The Tax Cuts and Jobs Act of 2017 (TCJA) is set to expire at the end of 2025, which will reverse many of its provisions, including reduced personal income tax rates, higher standard deductions, increased estate tax exemptions, and the ability to expense business investments. Tax experts predict that the incoming Congress will likely introduce substantial new tax legislation to replace the TCJA. The candidates' commitments during the campaign could shape future tax policy priorities.
Assessing Candidates Through an Estate Planning Perspective
Here are some important tax-related terms to consider in relation to estate planning:
- Capital Gains Tax: Tax on profit made from selling an asset, like stocks or real estate.
- Estate Tax: Tax imposed on the transfer of property after death.
- Gift Tax: Tax on the transfer of property between individuals during their lifetime without full value in return.
- Income Tax: Tax on an individual’s or entity's income.
- Tax Credit: An amount that can be deducted from total tax liability.
- Tax Deduction: A reduction in taxable income, which can lower or eliminate tax liability.
- Tax Exemption: A monetary exclusion that decreases taxable income.
- Trust Income Tax: Tax on income generated by a trust.
Candidates' Stances on Estate-Planning Taxes for 2024
Former President Donald Trump: Trump aims to make the 2017 individual tax cuts permanent, as well as the expiring estate tax cuts from the TCJA. The unified gift and estate tax exclusion is due to expire on December 31, 2025, reverting to pre-TCJA levels, which are expected to be about half of the current amounts ($13.61 million per individual and $27.22 million for married couples).
Vice President Kamala Harris: Harris plans to tax long-term capital gains and qualified dividends at ordinary income tax rates for individuals earning over $1 million. She also proposes taxing unrealized capital gains at death for amounts exceeding a $5 million exemption ($10 million for joint filers). Additionally, she suggests a minimum effective tax of 20 percent on unrealized capital gains from assets such as stocks, bonds, and privately held companies, along with higher top income tax rates and stricter estate tax regulations to limit inherited wealth accumulation.