Tax Planning Moves To Consider Before and After the Election
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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Many Americans are concerned about how the upcoming election will affect their finances. A recent GOBankingRates survey found that for 25% of Americans, their financial situation is the sole factor in determining which presidential candidate they will vote for, and for an additional 42%, it is part of their decision.
One financial aspect that may be top of mind for voters is how the election results will impact their taxes. To be prepared for either Vice President Kamala Harris or former President Donald Trump winning, here are a few tax planning moves to consider before and after Election Day.
Tax Planning Moves To Consider Before Election Day
Even though the next president will not take office until January, it’s smart to start thinking about the potential tax implications of a new president now.
“Make sure you are talking with your financial advisor now about how the current income and estate tax provisions — and any potential changes — may impact you,” said Kraleigh Woodford, SVP of planning and advice services at LPL Financial. “Regardless of who wins the election, it will likely require a political majority in Congress to make changes, so it is possible that the Tax Cuts and Jobs Act as currently written will expire or sunset.”
Woodford said not to wait for Election Day to implement an estate plan.
“There are countless Americans waiting on the election before they implement advanced estate planning, and those who act first will be rewarded with favorable fees and increased time for implementation,” she said.
In addition, Woodford said that now is a great time to consider any goals that could be impacted by short-term market swings.
“For example, does it make sense to begin reviewing tax loss harvesting potential in your portfolio, or considering Roth conversion figures or new contributions to 529s if markets contract?” she said.
“For business owners, year-end depreciation planning may also be a helpful strategy to explore,” Woodford continued. “There could be an opportunity to take advantage of tax deductions for new assets if you are planning on making investments regardless. Again, now is the best time to begin looping in your financial advisor to see which strategies may be appropriate.”
Tax Planning Moves To Consider Making Post-Election in the Event of a Trump Win
Trump and Harris have different plans and priorities when it comes to taxes, so the tax planning changes you should make post-election will depend on who takes the White House. If Trump wins, you can likely expect an extension of the Tax Cuts and Jobs Act that he enacted in 2017.
“This means we would continue with a historically high estate tax exemption, giving wealthy individuals a significant opportunity to continue to gift assets outside of the estate tax system and avoid a 40% estate tax at death,” Woodford said. “In this scenario, Americans with net worths less than $10 million will want to pay particular attention to the timing of gifts, as it may be better to wait.
“For example, many people want to give real property to their children during life, but that transfers a low basis to their children,” she continued. “By waiting until death, their children would receive a stepped-up cost basis, allowing them to avoid a significant amount of capital gains.”
Trump has also proposed eliminating Social Security taxes for retirees and reducing the tax burden on U.S. citizens living and working abroad. In addition, he is unlikely to raise business income taxes — he may even make these lower.
“Therefore, additional planning opportunities could arise for Americans in these groups as well,” Woodford said. “Your financial advisor can help you navigate these and other changes as you think about your overall financial goals.”
Tax Planning Moves To Consider Making Post-Election in the Event of a Harris Win
“In the event of a Harris administration, we can expect a considerable amount of tax and estate planning opportunities based on changes proposed during the campaign so far,” Woodford said.
“If Harris’ proposals are enacted, high earners could see significant impacts like new limits on retirement contributions for high earners with high balance retirement accounts, a cap on tax deferral for real estate, and a potential 28% capital gains rate for those with income above $1 million,” she continued. “And, with proposed increases to the corporate tax rate, corporate AMT rate and the top individual rate, businesses including pass-throughs may wish to revisit their business structure.”
It is also likely that Harris would support the American Housing and Economic Mobility Act of 2024.
“It is believed her administration would look to reduce the estate tax exemption to $3.5 million while also increasing the tax rates, resulting in significant estate tax planning opportunities for individuals over this threshold,” Woodford said. “These individuals would then want to look for ways to reduce their taxable estate by considering a transfer of assets to irrevocable trusts to be held outside of the estate tax system.
“Once assets are owned in proper irrevocable trusts, they can potentially avoid the estate tax for multiple generations,” she continued. “There is an entire alphabet soup for estate planning, and the sooner they visit their financial advisors, the sooner they can learn which strategies are appropriate for them.”
Tax Planning Moves To Consider Post-Election, Regardless of Who Wins
There are some tax planning moves that you should consider for the coming year, no matter who wins the presidential election.
“Stick to the fundamentals,” Woodford said. “Continue to review estate plans and keep flexibility in your financial and tax planning goals. Don’t miss the opportunity to contribute to retirement accounts and take business deductions when you can. As for larger individual charitable giving, make plans that incorporate multiple years for added deduction agility.
“Talk to your financial advisor early and often to make sure you have a plan in place to help you navigate any possible changes to income and estate tax provisions.”
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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