Trump and Harris Tax Plans: A Concise Comparison

With the upcoming elections, client advisors are likely to receive questions from clients about the tax implications of the Trump and Harris tax plans. Here is a concise comparison to help clients understand key differences and plan accordingly.

1. Income Tax Rates:

• Trump: Focuses on maintaining low individual tax rates established under the 2017 Tax Cuts and Jobs Act (TCJA). The top individual tax rate remains 37%, benefiting high-income earners.
• Harris: Proposes increasing taxes on high-income earners, with a top rate potentially moving back to 39.6%. For households earning over $400,000, this would be a significant increase.

2. Capital Gains:

• Trump: Plans to keep long-term capital gains taxed at 20% for high-income individuals. Trump also floated the idea of reducing the capital gains rate further, or indexing capital gains for inflation, which would be beneficial to investors.
• Harris: Proposes possibly taxing capital gains as ordinary income for those earning over $1 million, which could raise the tax rate to the highest marginal rate (up to 39.6%).

3. Estate and Gift Tax:

• Trump: Supports keeping the increased estate tax exemption introduced under TCJA ($12.92 million per individual in 2023). Trump has expressed interest in repealing the estate tax entirely.
• Harris: Probably favors lowering the estate tax exemption back to pre-TCJA levels ($5.49 million per individual), which could result in more estates being subject to tax. Additionally, stepped-up basis on inherited assets could be eliminated, increasing tax burdens for heirs.

4. Tax Credits and Deductions:

• Trump: Emphasizes tax breaks for businesses and investors. No major changes proposed to individual credits or deductions, continuing policies that favor wealth accumulation.
• Harris: Focuses on expanding child tax credits, creating a refundable credit for low-income earners, and offering relief for middle-class families, particularly in areas like healthcare and education.

Advisors should help clients navigate these potential changes by discussing strategies like timing of income, managing capital gains, and estate planning. The two contrasting approaches in tax policy highlight the need for proactive tax planning to optimize individual tax outcomes under either administration.

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