With elections around the corner, paying attention to the candidates’ tax plans is crucial. Clinton wants upper-income Americans to pay more, while Trump seeks across-the-board tax cuts. Per The Kiplinger Tax Letter, some highlights of both candidates’ plans are:
- Raise in capital gains rates for individuals in the 39.6% bracket who sell assets they have owned for six years or less. Taking into account the 3.8% surtax on net investment income, these folks would pay tax at a 43.4% rate on gains from assets held two years or less. The rate would drop incrementally to 23.8% (the rate currently) for assets held more than six years.
- Surcharge on taxpayers with AGIs over $5 million.
- Payroll tax hikes by increasing the wage ceiling on the 6.2% Social Security tax.
- Cap of 28% on the value of itemized deductions (except charitable contributions).
- 30% minimum tax on millionaires.
- Restrictions on those taxpayers with large balances in their retirement plans or IRAs.
- Doubling of the child tax credit to $2,000 for each child up to age four.
- New caregiver credit of up to $1,200 to provide relief to people who help care for elderly parents or grandparents.
- Reduce individual tax rates into three tax brackets: 12%, 25%, and 33%. For married couples, the 12% rate runs to $75,000, the 25% one tops out at $225,000 and the 33% rate kicks in after that. These thresholds are cut in half for single filers.
- 15% business rate.
- Standard deductions would go up to $30,000 for joint filers and $15,000 for singles.
- No more personal exemptions or head-of-household filing status.
- Capital gains tax would stay as is.
- Elimination of the 0.9% and 3.8% Affordable Care Act surtaxes.
- Elimination of alternate minimum tax, as well as estate and gift tax.
- Expansion of dependent care breaks for working and stay-at-home parents and creation of tax-favored savings accounts for child development and elder care expenses.
- Itemization would be capped at $200,000 for couples and $100,000 for singles.
The most noticeable disagreement between the two candidates is over the Affordable Care Act (aka Obamacare):
- Increase premium tax credits.
- Refundable tax credit up to $2,500 to insured individuals, $5,000 for families for individuals whose out-of-pockets expenses exceed 5% of income.
- Ditch the plan completely.
- Give individuals an above-the-line deduction for premiums that they pay and not subjecting the write-offs to an adjusted-gross-income threshold.
- Rely more on HSAs to help individuals pay for coverage