Every four years politicians try to sell us something that seems more affordable. There are many things being sold this year with the top three sales items being the economy, immigration and abortion. But did you know that taxes are up for sale in this year’s election, more significantly than in prior years? Presidents do not come into office with the responsibility of having to reform the United States tax code; but whoever wins the presidential election, will inevitably have to make changes in the tax law, since several provisions are set to expire in 2025.
In case you forgot the Tax Cut and Job Act of 2017, established several provisions which will expire in December of next year. The list of provisions set to expire and result in tax increases for most people include the child tax credit. If the child tax credit expires without being addressed by the new president and congress, it will be lowered to $1,000 from its current amount of $2,000.
Further, if no changes are made to the current tax laws by the new president, the $10,000 cap on deducting state and local taxes on your federal taxes will return and allow deductibility for taxpayers once again. And, finally the standard deduction will be lower which was doubled under the 2017 tax law and personal exemptions will return for taxpayers. These and several other provisions are on the sales ballot in the this year’s election. Is your vote up for sale and what is being sold this year? Let’s look at a few “tax sale” items which can impact your finances.
Both Parties Like Tips
Republicans and Democrats seem to hardly agree on anything, but when it comes to taxing tips, both candidates agree that tips should be exempt from federal income tax. While they agree on the basic concept, the democratic proposal seems to suggest that the tip federal tax exclusion would be capped at $75,000. If your income comes from that stream of revenue, then any candidate’s tax policy sales pitch can get your vote without any financial consequences .
Republican Party Proposal :
Taxes on your Social Security benefits will be eliminated if you buy with the Republican candidate for your vote. Under the current tax structure your social security is taxed if your adjusted income consists of other income, plus half of your social security income. The tax on social security will occur if your adjusted income exceeds certain thresholds . Your vote is for sale if you don’t want your social security taxed.
Your child tax credit will be increased by $3,000 dollars if you buy what the republican candidate is selling. Currently the child tax credit is $2,000. However, if your vote is for sale and you are buying what is being sold, it would be increased from $2,000 to $5,000.
Democratic Party Proposal:
The democratic candidate is selling the extension of the current tax cuts for individuals who earn less than $400,000 annually. The income tax rates would increase on those whose income exceeds $400,000 for singles and $450,000 for married couples from 37% to 39%. If you are in favor of those tax changes, you may be inclined to vote accordingly since your finances will be impacted.
Perhaps one of the more interesting financial sales pitches for your vote is taxing investment income. Under the Democratic candidate, capital gains tax rates will increase to 28% for households earring $1,000,000. Additionally, there is a proposal to tax what is known as unrealized gain in capital assets. Unrealized gain is simply the increase in value of an asset purchased without the sale of the asset. Here is an example. Say you purchased some Apple stock at $100 dollars per share. The stock has now appreciated and is valued at $150 per share. The Democratic Party sales pitch is to tax the $50 gain on the asset even though you have not sold or realized a gain on the asset. The unrealized capital gain tax would be on anything in excess of five million at the time of death. If you are buying the change and increase in capital gain tax rates, your vote is for sale.
WHAT’S UP! Today’s What’s Up is about shopping. Small business shopping day at your local business is October 30, 2024. According to American Express shoppers spent $17 Billion during the holidays in 2023. Be sure to support you local small business if you can. And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2024. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.
