Election 2024 – Analysis of the Presidential Candidates’ Tax Proposals

The presidential election is upon us – and while plenty of topics have been addressed by Vice President Kamala Harris and former President Donald Trump, the tax proposals of each candidate are worth exploring. Below, we discuss the proposed tax policy of the presidential candidates.  

Sunset of the Tax Cuts and Jobs Act (TCJA) in 2025

Many of the Tax Cuts and Jobs Act (TCJA) provisions were not permanent, and these will unwind next year, reverting to the tax law in effect prior to the TCJA. The TCJA sunsets are among the items the new Administration will need to confront next year.

The following are selected TCJA provisions that expire or sunset as of December 31, 2025:

• Individual Income Tax Rates: Top rate of 37% will increase to 39.6%
• 20% Qualified Business Income Deduction: Section 199A – available to many pass-through businesses operating as S Corporations or partnerships/LLCs
• Standard Deduction: TCJA nearly doubled this deduction
• SALT Deduction Limited: Cap of $10,000  
• AMT Exemption Raised: TCJA raised the AMT exemption, which caused a significant reduction in taxpayers that were subject to AMT 
• Child Tax Credit: Increased to $2,000 from $1,000
• “Pease Adjustment” that reduced 3% of itemized deduction: Higher income taxpayers were subject to a phaseout of their itemized deductions. It was removed in 2018 by TCJA but will return in 2026. This raised the marginal tax rate by about 1.2%
• Estate and Gift Tax Exemption Doubled and Indexed for Inflation: Now stands at $14,610,000

There are also many TCJA items that are permanent and not scheduled to expire. Congress would need to enact new tax laws to change these provisions:

• Corporate Tax Rate: TCJA permanently reduced the corporate tax rate to 21% from 34% (and 35% for larger corporations).The corporate tax rate has remained at 21% and is not scheduled to change
• Capital Gains and Qualified Dividends: Tax rate remains at lower rates of 15% or 20%, depending on taxpayer’s overall income

Candidates’ Positions on TCJA Provisions Scheduled to Sunset

Each candidate has announced various tax proposals they would like to see adopted. Below, we will address how the candidates stand on these key selected TCJA provisions: 

Individual Tax Rates

• Harris’ Position: Increase top tax rate for taxpayers with income >$400,000 to 39.6%, but retain TCJA rates for those with income <$400,000                    
• Trump’s Position: Make TCJA tax rates permanent

Capital Gains Tax Rates     

• Harris’ Position: Increase rate to 28% for taxpayers with income >$1 million        
• Trump’s Position: Make capital gains tax rate permanent and retain income thresholds 

20% QBI Deduction

• Harris’ Position: Uncertain on policy but will not result in tax hikes to taxpayers with income <$400,000
• Trump’s Position: Make QBI deduction permanent

Standard Deduction            

• Harris’ Position: No specific position, but no tax increases to those with income <$400,000
• Trump’s Position: Make higher standard deduction permanent

SALT Deduction Cap                      

• Harris’ Position: No specific position but likely would support higher SALT cap
• Trump’s Position: Open to raising the SALT cap

AMT Exemption                                

• Harris’ Position: No specific position on AMT, but any change should not raise taxes on those with income <$400,000
• Trump’s Position: Make AMT changes permanent

Child Tax Credit                              

• Harris’ Position: Raise credit to $6,000 for each child under age one and to $3,600 for those > age one
• Trump’s Position: Raise credit to $5,000 for all children and no income phase-outs

Estate/Gift Exemption                    

• Harris’ Position: No proposal offered on amount of estate/gift exemption
• Trump’s Position: Make estate/gift exemption permanent

For tax provisions not scheduled to expire, each candidate’s proposals follow:

21% Corporate Tax Rate

• Harris’ Position: Increase rate to 28% and raise corporate AMT rate to 21% (up from 15%)
• Trump’s Position: Lower corporate tax rate to 15%-20%

Capital Gains and Qualified Dividends

• Harris’ Position: Increase the top long-term capital gains rate to 28%, up from 20% now for taxpayers with more than $1 million in income
• Trump’s Position: Make TCJA rates permanent

Other Tax Proposals

The presidential candidates have proposed other tax policies not directly tied to the TCJA sunset. These proposals, if adopted, would be part of overall tax legislation debate next year dealing with the TCJA. Below are some of the tax proposals:

Tips: Tips earned by workers are subject to income tax and Social Security tax.

• Harris’ Position: No tax on tips. Uncertain whether this applies just to income tax or to income tax and social security tax
• Trump’s Position: No tax on tips. Uncertain whether this applies just to income tax or to income tax and social security tax

Overtime: Overtime wages are subject to income tax and social security tax.

• Harris’ Position: No proposal
• Trump’s Position: No tax on overtime wages. Uncertain whether this applies just to income tax or to income tax and social security tax

New Home Credit: No tax credit now for taxpayers buying a new home.

• Harris’ Position: A new mortgage tax credit for first-time home buyers of up to $10,000. Additional offer to first-time buyers a down payment aid of $25,000. Uncertain if this aid is a tax credit, loan or other. Further, provide tax benefit to builders of houses if home sold to a first-time buyer
• Trump’s Position: Supports tax relief to encourage first-time home buyers, but no specific plan announced

Tax on Unrealized Gains: Income tax is recognized when property is sold or disposed. Holding onto property that is appreciating in value is not a taxable event.

• Harris’ Position: Unrealized capital gains subject to tax on taxpayers worth >$100 million. Uncertain of details of this tax
• Trump’s Position: No provision to tax unrealized gains for any taxpayer

Social Security Benefits: Social Security benefits are subject to income tax depending on all the other income of taxpayer. Up to 85% of Social Security benefits can be taxed; or as little as -0-.

• Harris’ Position: No proposal
• Trump’s Position: Social Security benefits would not be subject to income tax. Uncertain of details

Interest on Car Loans: Interest expense paid on a car loan is generally not deductible.

• Harris’ Position: No proposal
• Trump’s Position: Interest expense on a car made in the U.S. would be deductible. Uncertain of details

Deduction for Home Generators: The cost of a home generator is not a deductible item.

• Harris’ Position: No proposal
• Trump’s Position: Cost of a new home generator would be deductible. Not certain of any limitations

Credit for Family Caregivers: There is no credit or deduction available now to taxpayers for family caregiving costs.

• Harris’ Position: No tax proposal on family caregiving costs but proposes expanding Medicare coverage for home healthcare costs
• Trump’s Position: Proposed new tax credit for family caregivers that care for a parent or family member

Role of Congress in Tax Proposals

Please note that Congress actually writes the tax law, and the President can either sign the bill into law or veto it. While the new President can recommend tax changes, the Administration will need to work with Congress to accomplish a change in tax policy or to implement a tax change. What happens on Election Day will impact what tax laws are introduced, debated, voted on and possibly enacted next year. At Sikich, we will continue to monitor the legislative developments in Washington. Please reach out if you’d like to learn more.

About Our Authors

Jim Brandenburg, CPA, MST, possesses extensive experience and knowledge in corporate and partnership tax law, mergers and acquisitions, and tax legislation. His expertise includes working with owners of closely held businesses to identify tax planning opportunities and assist them in implementing these strategies.

Tom Bayer, CPA, CExP, has specialized expertise in the areas of business succession planning, tax planning and compliance, and business advisory. He has deep experience providing a range of accounting, tax, and business advisory services to commercial clients across industries.