How a Trump or Clinton Tax Plan Could Impact Your Retirement Planning :: Wamhoff Financial & Accounting


How a Trump or Clinton Tax Plan Could Impact Your Retirement Planning

Donald Trump and Hillary Clinton have very different tax proposals, both of which could have an affect on your retirement planning. Bob Wamhoff, president of Wamhoff Financial Planning & Accounting Services, outlines the highlights of both plans, and explain what investors need to be aware of.

Trump’s Plan

  • Reduce the top marginal tax rates from 39.6%, a move that will benefit the country’s highest income earners.
  • Consolidate the federal income tax brackets from six to three: 12%, 25% and 33%
  • Eliminate the alternative minimum, estate, gift and investment income tax.
  • Reduce business tax rates to no more than 15%
  • Set a maximum capital gains tax rate of 20%
  • Set a maximum tax rate of 10% for those earning $100,000 or less

How it may affect retirement planning and investing

  • If the estate tax is eliminated, some families will experience great savings, and most families will not need estate tax planning.
  • Planning for pass through income could get more complicated

Clinton’s Plan

  • Raise taxes and limit deductions for high-net-worth clients
  • Place a cap on itemized deductions at 28% of income
  • Impose a 4% “fair share” surtax on income above $5 million, which would raise the top rate to 43.6%
  • Raise the top rate on dividends on capital gains to 28% (from 20%)
  • Raise the current earnings cap of $118,500 for contributions to Social Security and Medicare
  • Close loopholes on existing estate tax law to eliminate sheltering funds and restore the 45% rate on estates with a $3.5 million exemption
  • Limit gifting to $1 million lifetime exemption

How it may affect retirement planning and investing

  • More funds will be coming into the Social Security and Medicare system due to the increased earnings cap
  • Consider paying down (or paying off) mortgages or other loans for which you receive a deduction
  • The higher rate on dividend and capital gains may impact the bond and stock markets
  • Estate tax law revision could affect large landowners, such as farmers