Gelt’s Guide to the 2024 Presidential Tax Plans

Let’s break the key elements of each plan, and what they could mean for you:

• Individual Income Taxes
• Investment Income and Capital Gains
• Tax Credits and Deductions
• Business Taxes
• Estate Taxes
• Key Takeaways
• Final Thoughts: How Could These Plans Impact You?

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💰 Individual Income Taxes

1. Tax Category: Top Individual Tax Rate

Trump’s Plan: Keep the top rate at 37%

Harris’s Plan: Raise the top rate to 39.6% for high earners

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2. Tax Category: Social Security Income

Trump’s Plan: Exempt Social Security income from federal taxes

Harris’s Plan: No changes proposed

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3. Tax Category: Medicare Tax

Trump’s Plan: No changes proposed

Harris’s Plan: Raise the Medicare tax to 2.1% for incomes over $200K

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Impact:

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• High earners could benefit more under Trump’s plan, which keeps taxes low.
• Retirees could benefit from Trump’s plan, which exempts Social Security from federal taxes—potentially reducing taxable income for many retirees.
• Harris’s plan increases taxes on high-income individuals to fund social programs, meaning those earning over $200,000 could face higher rates and Medicare taxes.

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📈 Investment Income and Capital Gains

1. Tax Category: Capital Gains Tax

Trump’s Plan: Lower capital gains tax to 15%

Harris’s Plan: Raise capital gains tax to 28% for gains exceeding $1M

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2. Tax Category: Unrealized Gains

Trump’s Plan: No taxes proposed

Harris’s Plan: Impose a 25% minimum tax on unrealized gains for individuals with a new worth over $100M

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3. Tax Category: Carried Interest

Trump’s Plan: No changes proposed

Harris’s Plan: Tax carried interest as ordinary income if you earn over $400,000

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4. Tax Category: Net Investment Income Tax

Trump’s Plan: No changes proposed

Harris’s Plan: Increase the rate to 5% and expand the tax base to active pass-through business income

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5. Tax Category: 1031 Exchanges

Trump’s Plan: No changes proposed

Harris’s Plan: Limit tax deferral on like-kind exchanges to $500,000 in gains

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Impact:

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• Self-employed business owners of S Corporations and Partnerships could experience a 5% tax increase on their profits under Harris’s plan, if the Net Investment Income Tax is expanded.
• Investors would face significantly lower capital gains taxes under Trump’s plan, while Harris proposes higher rates for those earning over $1 million.
• Wealthy individuals could be taxed on unrealized capital gains under Harris’s plan, meaning they’d pay taxes on asset appreciation even without selling them.
• Private equity and hedge fund managers would see the carried interest loophole closed under Harris, potentially increasing taxes on their income.
• Real estate investors could lose some tax benefits under Harris’s plan, as 1031 like-kind exchanges—commonly used to defer taxes on real estate sales—would be capped at $500,000 in deferred gains.

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💡 Tax Credits and Deductions

1. Tax Category: Green Energy Credits

Trump’s Plan: Eliminate green energy tax credits introduced in the Inflation Reduction Act

Harris’s Plan: Keep and expand green energy tax credits

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2. Tax Category: Child Tax Credit

Trump’s Plan: No changes proposed

Harris’s Plan: Expand child tax credit and provide a $6,000 credit for newborns

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3. Tax Category: Homebuyer Credits

Trump’s Plan: No changes proposed

Harris’s Plan: Introduce homebuyer credits up to $25,000

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4. Tax Category: Other Credits

Trump’s Plan: No changes proposed

Harris’s Plan: Expand earned income tax credit (EITC) and health insurance premium credits

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Impact:

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• Middle-class families stand to benefit from Harris’s plan through expanded child tax credits and new credits for newborns, as well as health insurance tax credits.
• First-time homebuyers could benefit from the introduction of a $25,000 homebuyer credit under Harris.
• Green energy investors may lose tax benefits under Trump’s plan, while Harris would continue supporting clean energy through tax incentives.

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📊 Business Taxes

1. Tax Category: Corporate Tax Rate

Trump’s Plan: Lower corporate tax to 20% (15% for US-based manufacturers)

Harris’s Plan: Raise corporate tax to 28%

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2. Tax Category: Start-Up Deductions

Trump’s Plan: No changes proposed

Harris’s Plan: Increase start-up expense deduction from $5K to $50K

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3. Tax Category: Other

Trump’s Plan: Make TCJA changes permanent, including the Qualified Business Income Deduction and expanded bonus depreciation

Harris’s Plan: Did not address expiring TCJA provisions

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Impact:

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• Partnership and S Corporation owners eligible for the Qualified Business Income Deduction would face higher taxes under Harris’s plan if these TCJA provisions are allowed to expire.
• Corporations would benefit from Trump’s plan, which lowers the tax rate and maintains favorable provisions for businesses, including permanent TCJA changes.
• Startup businesses could benefit from Harris’s plan, which increases the start-up deduction and opportunity for early-stage businesses to enjoy immediate tax relief.

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🏦 Estate Taxes

Tax Category: Estate Tax

Trump’s Plan: Keep the estate tax exemption at $11.7M

Harris’s Plan: Lower the exemption to ~$7M

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Impact:

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• Wealthy families would be able to pass on more wealth without incurring estate taxes under Trump’s plan, keeping the estate tax exemption at $11.7 million. Harris’s plan reduces this exemption to $7 million ($5 million indexed for inflation), meaning more estates would be subject to tax.

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Key Takeaways

• If you’re a high earner or investor, Trump’s plan will likely help reduce your tax burden, while Harris’s plan could raise your taxes, especially on investments and large estates.
• If you’re a small business owner or middle class household, Harris’s plan offers expanded deductions, credits, and support for new businesses, but it may raise taxes for pass-through entities and corporations.
• For retirees or families with estates, Trump’s plan offers more favorable terms with tax exemptions for Social Security income and higher estate tax exemptions.

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Final Thoughts: How Could These Plans Impact You?

The tax policies of Trump and Harris present two very different futures for U.S. taxation. Trump’s proposals aim to keep taxes low for high earners, corporations, and investors, while Harris focuses on raising taxes on the wealthy to expand benefits for middle- and low-income families through new credits and deductions.

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Understanding these differences will help you make important decisions as the election approaches and anticipate the changes to our tax code that may follow.