As we near the results of the presidential elections in The United States, here’s what you need to know. In addition to their take on foreign policies, climate change, and immigration, presidential candidates have laid their plans for tax law changes on the table. And these plans will directly affect you on many levels. So read on to learn what to expect, how the changes will reflect on your business, and how urgently you need a CPA to help you move forward.
Donald Trump’s Tax Changes
Being his second time here, former president Donald Trump has come prepared. With a long list of suggestions and changes that will impact individuals and businesses of all sizes.
- Extension of the TCJA: Trump plans to extend the 2017 Tax Cuts and Jobs Act (TCJA), which provides substantial benefits for real estate investors, such as 100% bonus depreciation and the Qualified Business Income (QBI) deduction.
- Corporate Tax Reduction: Trump proposes reducing the corporate tax rate from 21% to 15%, which would benefit businesses structured as C-Corps and potentially increase after-tax profitability.
- Taxes on Tips, Overtime, and Social Security: Trump’s proposal to eliminate taxes on tips and overtime could have an indirect benefit on landlords by stabilizing tenant income. His plan to remove Social Security taxes for seniors might also improve financial flexibility for retired investors, increasing housing accessibility.
- Tariff Overhaul: Trump has floated the idea of replacing federal income tax with a tariff-based system, which could increase the costs of goods like construction materials and supplies. This shift might impact investor profits due to higher renovation and construction expenses.
With so many ideas and suggestions for tax changes in line, this might be a good time to consult with a CPA. So make sure you have one of the best CPAs on the market to help you analyze and untangle any complexities that will arise once these changes are in order.
Kamala Harris’ Tax Proposals
Moving on to the Democrats’ take on taxes and the changes they believe will yield the best outcomes for individuals, businesses, and the whole country.
- Expiration of TCJA Benefits: Harris supports the gradual phase-out of the TCJA, particularly 100% bonus depreciation, which would drop to 40% by 2025 and expire in 2027.
- Increased Taxes on High Earners: Harris proposes increasing the corporate tax rate to 28% and the top individual tax rate for high earners to 39.6%.
- Rent Control and Housing Reforms: Harris’s proposals include rent caps for certain landlords and limits on algorithm use for rent pricing. This could restrict rent growth for large landlords, particularly in high-demand areas.
- Affordable Housing Incentives: Harris focuses on affordable housing with tax breaks for developing low-income housing and a $25,000 first-time homebuyer credit. These incentives could drive demand for affordable housing, benefiting investors in that market but increasing competition.
- Restrictions on Roth Strategies and 1031 Exchanges: Harris is also targeting mega backdoor Roth IRA strategies, limiting high-net-worth individuals’ contributions, particularly those with accounts over $10 million. Additionally, she proposes capping § 1031 exchange deferrals at $500,000, limiting high-value property investors’ ability to defer capital gains taxes through reinvestment.
Deciphering Tax Law Changes
What do these changes mean for you as a freelancer, an immigrant, or a business owner?
How will the candidates’ vision of tax laws impact your life, family, and income?
Well, this all depends on the elections’ results and who you hire to help you decrypt the changes and their implication on you.
So rather than worrying too much about taxes, free up your mind and time and allow a CPA to step in and help you. We at Zaouk CPAs can analyze your case, assess your current situation, and help you adjust your finances and business strategies to fully make use of the upcoming tax changes, and maintain good financial standing.
