With the 2024 presidential election fast approaching, tax policy is emerging as a key issue among voters.
While former President Donald Trump and Vice President Kamala Harris have floated different proposals, both candidates’ platforms carry significant implications for business owners.
Donald Trump's Tax Proposals for the 2024 Election
Trump’s tax policy proposals for the 2024 election emphasize reducing tax burdens for businesses, with a focus on lowering corporate taxes and supporting domestic production.
Key Proposals:
- Lower Corporate Tax Rate: Trump plans to reduce the corporate income tax rate from 21% to 20%, with a potential cut to 15% for companies that manufacture their products in the U.S. This could significantly reduce the tax burden for small and medium-sized businesses that produce domestically.
- Make TCJA Tax Cuts Permanent: The 2017 Tax Cuts and Jobs Act (TCJA) reduced tax rates for individuals and businesses. Trump aims to make these cuts permanent, providing long-term tax relief to businesses that benefitted from the original legislation. This includes estate tax exclusions, which would be cut in half should the TCJA expire.
- Exemptions for Overtime Pay, Social Security, and Tips: Trump has proposed exempting overtime pay, Social Security benefits, and tip income from taxation. This could particularly benefit service-based businesses with employees who rely on tips or overtime pay.
- Reinstate SALT: Trump has proposed to reinstate the unlimited itemized deduction for state and local taxes (SALT) paid, or discontinue the cap as part of TCJA extension.
Kamala Harris's Tax Proposals for the 2024 Election
Harris’s proposed policies are aimed at increasing taxes on corporations and higher-income earners while expanding tax credits for working families and individuals.
Key Proposals:
- Increase Corporate Tax Rates: Harris plans to raise the corporate tax rate from 21% to 28%, with an increase in the corporate alternative minimum tax to 21%.
- Expanded Tax Credits: Harris proposes significant expansions to the child tax credit, earned income tax credit (EITC), and health insurance marketplace premium tax credits. She proposes a child tax credit of $6,000 for children under age 1, $3,600 for children 2-5, and $3,000 for older children.
- Capital Gains and Dividend Taxes: Harris aims to increase the capital gains tax to 28% for high earners and introduce a tax on unrealized gains at death, with certain exemptions. This policy could affect business owners looking to sell or pass on their businesses, increasing the tax burden on high-value asset transfers. She is also considering introducing a tax on unrealized gains for individuals with an ultra-high net worth.
- Limitations on Like-Kind Exchanges: Harris has discussed limiting 1031 like-kind exchanges to $500,000 in gains, which could impact real estate developers and businesses that frequently use property exchanges to defer taxes.
Stay Informed
These proposed policies aren’t set it stone and could certainly evolve as we get closer to Election Day.
Sources:
© 2024 SVA Certified Public Accountants
