4 Changes Wealthy Retirees Can Expect If Kamala Harris Wins the 2024 Election
Written by
Sean Bryant
Edited by
Amber Barkley
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When determining which presidential candidate to vote for, there are many things to consider. One of them is how the candidate’s policies could impact your finances. Based on her early campaign speeches, several potential policies for Kamala Harris could significantly impact wealthy retirees.
Keep reading for a look at four changes that wealthy retirees can probably expect if Harris wins the 2024 presidential election.
A Possible Wealth Tax
Many people are unaware of what a wealth tax is. That’s because comprehensive wealth taxes have never been implemented in the United States. A wealth tax is just how it sounds: a tax on a person’s net worth, typically when that net worth is above a certain amount. If a wealth tax was established, it could potentially mean double or triple the taxes for wealthy individuals.
Harris has been on record supporting a national wealth tax, which could significantly impact wealthy retirees. While there would likely be ways to structure your estate to bypass some of the tax, most people would still end up paying significantly more in taxes than they do today.
Changes to Estate Taxes
Part of the Tax Cuts and Jobs Act of 2017 was an increase in the estate tax exemption. In 2024, the federal estate tax exemption is $13.61 million for a single filer and $27.22 million for a couple. If Harris is elected president, there’s a good possibility she would lower the estate tax exemption or increase the estate tax rate. This would increase the tax liability for wealthy families after their death.
While the percentage of American families exceeding this threshold is likely small, a reduction back to the old levels is likely to trigger an estate tax for additional families.
“If Kamala Harris wins in 2024, I expect capital gains and estate tax rates will increase significantly,” said David Brillant, tax and trust and estate lawyer and founder of Brillant Law. “My firm has created irrevocable trusts and family limited partnerships to help clients avoid estate taxes and capital gains at death.
“However, if ‘step-up in basis’ is eliminated, clients may face capital gains taxes on unrealized gains in assets they inherit. Higher income and capital gains tax rates will reduce investment income and the value of taxable portfolios.”
However, even with a potentially lower exemption level or higher tax rate, there are some things wealthy retirees can do to minimize their estate tax burden.
Gift Assets
Instead of waiting until death to transfer assets, wealthy retirees could gift those assets today and reduce the overall value of their actual taxable estate.
However, there is also a gift tax to be aware of. For 2024, each gifter can give up to $18,000 per recipient annually. Anything above that amount is subject to a gift tax. It’s expected that Harris would most likely reduce the gift exemption, as well.
Set Up an Irrevocable Trust
If the retiree is not ready to give the money away and would rather wait until their passing, they could establish an irrevocable trust. Irrevocable trusts can minimize future estate taxes and help avoid the probate process upon death.
However, once irrevocable trusts are executed, making changes to the trust is very difficult.
Higher Capital Gains Taxes
Capital gains are earned when assets, like stocks, bonds or real estate, are sold at a profit. The federal government then charges a tax on these capital gains. Most taxpayers pay a capital gains tax of 15%, but those in the top income bracket pay a 20% capital gains tax. However, these rates could increase under a Harris presidency.
Depending on how their retirement portfolio is structured, retirees may be more likely to feel the impact of a higher capital gains tax. This is because they may be selling assets to provide income during retirement.
“Kamala Harris has proposed raising capital gains taxes for high earners,” said Brillant. “This could significantly impact wealthy retirees who rely on investment income. My clients with large investment portfolios would likely see higher taxes on their capital gains and dividends, reducing their income.”
Elimination of Backdoor Roth IRAs
Backdoor Roth IRAs are popular for wealthy individuals whose income doesn’t allow them to invest in a Roth IRA. With a backdoor Roth IRA, you’ll invest money in a traditional IRA and roll it over into a Roth IRA. This will allow your income to grow tax-free. However, it’s important to know that if you claim a tax deduction for the traditional IRA contributions, you’ll need to repay that when you convert the funds to a Roth IRA.
“Harris proposes eliminating ‘backdoor Roth IRAs’ and ‘mega backdoor Roth IRAs,’ which allow high-income clients to contribute more to tax-advantaged retirement accounts,” Brillant added. “Instead, clients may need to rely more on non-qualified accounts and maximize contributions to 401(k)s and HSAs before rates increase.”
The Bottom Line
Fiscal policies are just one thing to consider when deciding which presidential candidate to vote for. However, if you’re a wealthy retiree, a Harris win in November could have a significant impact on the value of your estate. Make sure you keep these things in mind when making your decision come November.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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