As the 2024 election heats up, tax policies are becoming a central issue in shaping the future economic landscape. Both Donald Trump and Kamala Harris have put forward tax proposals that could have a significant impact on your finances, depending on your income, investments, and business interests.
Let’s take a closer look at the key elements of their plans and how they might affect you.
Trump’s Tax Plan: Extending the 2017 Tax Cuts and More
Donald Trump’s proposed tax strategy focuses on reinforcing and expanding the tax reforms initiated during his presidency. Here’s what he’s advocating:
1. Making Tax Cuts Permanent
Trump’s plan calls for making the 2017 Tax Cuts and Jobs Act (TCJA) permanent. This would lock in the lower income tax rates, larger standard deductions, and estate tax exemptions established under that law. For individuals and businesses who benefited from these reductions, this could mean continued savings.
2. Further Reduction in Corporate Taxes
One of the boldest elements of Trump’s proposal is to lower the corporate tax rate even further, potentially down to 15%. The idea behind this is to make the U.S. more competitive globally, attract foreign investment, and incentivize businesses to grow and reinvest in the economy. For business owners, this could translate into greater profits and opportunities to scale.
3. Exclusion of Tips from Taxation
Another unique aspect of Trump’s plan is the exclusion of tips from being taxed. This would be a game-changer for service industry workers, allowing them to take home more of their earnings. The proposal is designed to provide relief to those in industries like hospitality, where tipping makes up a large portion of income.
Harris’ Tax Plan: Raising Taxes on the Wealthy and Corporations
In contrast, Kamala Harris’ tax plan focuses on increasing taxes on wealthy individuals and corporations. Here are the main highlights:
1. Limiting 1031 Exchange Benefits
Harris proposes capping the benefits of the 1031 exchange, a tax deferral mechanism used primarily in real estate. Investors who use this tool to defer taxes when exchanging properties of similar value would face new limits. This could impact high-value real estate transactions, where significant capital gains are involved. For real estate investors, this may lead to higher tax liabilities on sales and exchanges.
2. Raising Corporate Taxes
Harris’ plan includes increasing the corporate tax rate from 21% to 28%, rolling back part of the reductions implemented by the TCJA. This move would generate additional revenue for federal spending but could also reduce after-tax profits for companies. For business owners, particularly those running larger corporations, this would likely mean a higher tax burden and potentially fewer resources for expansion.
3. Higher Taxes for Top Earners
Another focal point of Harris’ tax policy is to raise long-term capital gains tax rates for individuals earning over $1 million annually. This aims to ensure that high-income individuals contribute a larger share of their earnings in taxes. For wealthy investors and top earners, this could mean more significant tax liabilities on investment gains, which may influence decisions on when and how to sell assets.
How Could These Plans Affect You?
Trump’s plan largely favors lower taxes across the board, particularly for businesses and higher-income earners, with the potential for some relief for service industry workers. If you own a business or benefit from real estate investments, Trump’s tax cuts could offer ongoing benefits.
Harris’ plan, on the other hand, focuses on increasing taxes for the wealthy and large corporations. If you fall into the top income bracket or are heavily involved in real estate investments, Harris’ plan might increase your tax obligations. However, those who don’t fall into these categories may not see significant changes, and some could benefit from enhanced government programs funded by the increased tax revenue.
The two tax plans present starkly different approaches to taxation and economic policy. While Trump’s plan focuses on cutting taxes to encourage growth and investment, Harris’ proposal aims to increase taxes on corporations and high earners to fund public programs.
As you consider how these plans might affect your personal and business finances, it’s crucial to stay informed and plan ahead. Whether you’re a business owner, real estate investor, or high-income earner, understanding the potential impact of these tax changes is essential for making sound financial decisions.
If you’re looking for expert guidance on how these tax proposals could positively or negatively affect you, reach out to Tavola Group today. Our team specializes in tax planning and can help you navigate the complexities of the evolving tax landscape, ensuring you’re prepared for whatever changes may come. Stay up-to-date and proactive with Tavola Group’s tailored tax strategies designed to safeguard your financial future.
