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:


    1. 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.
    2. Surcharge on taxpayers with AGIs over $5 million.
    3. Payroll tax hikes by increasing the wage ceiling on the 6.2% Social Security tax.
    4. Cap of 28% on the value of itemized deductions (except charitable contributions).
    5. 30% minimum tax on millionaires.
    6. Restrictions on those taxpayers with large balances in their retirement plans or IRAs.
    7. Doubling of the child tax credit to $2,000 for each child up to age four.
    8. New caregiver credit of up to $1,200 to provide relief to people who help care for elderly parents or grandparents.


    1. 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.
    2. 15% business rate.
    3. Standard deductions would go up to $30,000 for joint filers and $15,000 for singles.
    4. No more personal exemptions or head-of-household filing status.
    5. Capital gains tax would stay as is.
    6. Elimination of the 0.9% and 3.8% Affordable Care Act surtaxes.
    7. Elimination of alternate minimum tax, as well as estate and gift tax.
    8. 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.
    9. 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):


  1. Increase premium tax credits.
  2. 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.


  1. Ditch the plan completely.
  2. Give individuals an above-the-line deduction for premiums that they pay and not subjecting the write-offs to an adjusted-gross-income threshold.
  3. Rely more on HSAs to help individuals pay for coverage

Update of Tax Changes

As of May 15th here are more changes to consider when anticipating your taxes for 2009.

Some good news, believe it or not. In the true spirit of loopholes, the Obama administration has inadvertently lowered taxes on taxpayers that fall close to the upper limit of the 28% tax bracket for 2011. The way this works is the upper limit of the 28% bracket will move from $210,000 now to about $250,000 in 2011. So, the $40,000 between those two amounts will be taxed at 28% in 2011 compared to 33% today. Quit reading here if all you want is good news. The rest isn’t going to be pretty.

The income to be taxed at the new higher rates will be that above $250,000, not some lower amount which had been discussed previously.

The tax rate on capital gains will increase from 15% now to 20% in 2011, maybe sooner.

The phaseout for itemized deductions which is set to expire after the 2009 tax year, will be reinstated for uppers income earners in 2011 and later years. Right now it looks like there will be no phaseout of itemized deductions for any taxpayers in 2010. It also looks like the itemized deductions will not be allowed to reduce taxable income below the 28% tax bracket although there is a lot of political opposition to that proposal.

From a compliance standpoint, the President is proposing the corporations be forced to issue 1099’s to everyone, not just individuals, to which they pay more than $600 a year.

Independent contractors would be subject to withholding if they don’t provide a valid tax id number to the person for which they are providing services.

Employee leasing firms would be liable for unpaid payroll taxes, removing the employer from the burden of making those payments.

Estate taxes will be kept at this year’s level of $3.5 million. But estate planning will get trickier for those of you using the family limited partnerships for that purpose. The proposed rules include restrictions on valuation discounts for family limited partnerships making them less attrative to reduce the overall value of an estate.

The social security wage base is expected to remain the same for 2010, the first time since 1971 that the base amount on which social security taxes are assessed did not increase. In addition, there has been some talk of the social security tax rates increasing. This will not happen in 2011.

There has been a lot of discussion of the new sales tax deduction for new car purchases made between Feb. 16, 2009 and Jan. 1, 2010. The issue is the cap on the value of the new car on which the sales tax can be deducted. That cap is $49,500. Now, the IRS is saying they will allow the cap to be deducted for each car. Not just a single cap per taxpayer. So, if you buy two new cars this year, you can take the deduction for the sales tax on the first $49,500 cost of each vehicle, even if you don’t itemize.

That summarizes the most recent changes to the tax laws. But I am sure there will be many more proposals and we will try to keep you updated as they happen. As we approach the last half of the year, it will become more important to consider these changes in your tax planning meetings with us.

As always, please call us with any questions.