In less than one week, Americans will vote for our next President. While we won’t make a political endorsement or take a stance on any candidate running, we think it’s important to know the tax plans of both candidates and more importantly, to inform your clients about them.
If you are unsure how to communicate this to clients, or are having a hard time breaking it down into unbiased, easy to understand chunks, we’ve got you covered. Here’s a brief rundown of what is in each major candidate’s tax plan.
Hillary Clinton’s tax plan is generally designed to end tax breaks for the wealthy. Her main platform is building on the “Buffet Rule” proposed by President Obama in 2011. The Buffett Rule would apply a minimum tax rate of 30 percent on individuals making more than a million dollars a year. Her plans are to build on this idea to ensure the wealthy don’t have an unfair advantage. Here is what her tax plan proposes.
- A limit on itemized deductions (except the charitable deduction) to a tax value of 28%
- A 4% “Fair Share Surcharge” on the those taxpayers with adjusted gross income (AGI) above $5 million per year as a way to ensure that those in this income bracket pay an effective rate higher than middle-class families.
- Limits the total value of tax-deferred and tax-free retirement accounts
- Raises the top rate on medium-term capital gains on investments held less than 6 years to between 20% and 39.6%
- Closes loopholes in the tax system like the Bermuda reinsurance loophole and the “carried interest” loophole that allows hedge fund and other financial professionals to avoid paying the full income tax rate on their earnings.
- Return Estate Tax to 2009 parameters. This would reduce the exclusion from the current $5.45 million ($10.9 million for couples) to $3.5 million ($7 million for married couples).
- Expands the Child Tax Credit to allow an additional $1,000 for children under 5 years old and a 20 percent credit for caregiver expenses.
- Provides up to a $5,000 tax reduction for taxpayers incurring excessive health care costs
Donald Trump’s tax plan calls for lowering taxes across the board and reforming the tax code overall. Here are his proposed tax plans:
- Consolidation of the tax brackets into three with the biggest tax cuts going to middle class workers who are married with children. Tax rates would be: 12%, 25% or 33%.
- Lower the business tax rate to 15%.
- Closes special interest tax breaks
- Eliminates the “net investment income tax”
- Caps itemized deductions at $100,000 for single filers and $200,000 for married filers
- Makes the standard deduction $15,000 dollars for single individuals and $30,000 for married couples
- Eliminates the head of household filing status
- Eliminates the personal exemption and provides an “above the line” child care deduction from adjusted income for children up to 13 years of age for average child care expenses. This deduction would be phased out for individuals earning $250,000 or married taxpayers earning $500,000.
- Adds credits of up to $1,200 a year for child care costs as “spending rebates” for low-income taxpayers thru the earned income tax credit.
- Taxes carried interest at ordinary income rates instead of the current capital gains rates that currently aid Wall Street financial professionals
- Repeals the death tax and eliminates the individual alternative minimum tax
The Presidential election is on Tuesday, November 8th. Don’t forget to get out there and vote!