Post-Election Considerations for Investors

November’s landmark U.S. elections may affect planning for high-net-worth investors in December 2016 and beyond

Wednesday, December 7, 2016

2016 year end tax planning



Every year it is important to assess your year-end tax situation and implement strategies that could lower your tax bill when you file your return in April. But given the results of November’s landmark elections, in which Donald Trump was elected president and Republicans retained control of both houses of Congress, it is important to think about year-end planning in the context of how tax laws may change in 2017 and beyond.

The proposed changes that could have the biggest impact on high-net-worth investors include:

  • Highest marginal income tax rate reduced from 39.6% to 33%
  • Income threshold for 20% rate on capital gains lowered to $225,000 for couples and $112,500 for singles
  • Value of itemized deductions capped at $100,000 for singles or $200,000 for joint filers
  • Medicare surtax on investment income eliminated
  • Alternative minimum tax eliminated
  • Estate and gift taxes eliminated, as is the step-up in basis for inherited assets

In our latest Private Wealth Adviosry, we examine President-elect Trump’s proposed tax policies and discuss how they could influence some financial decisions you might consider before the clock runs out on 2016. We also outline several year-end strategies that are less dependent on the political landscape. Read report

Comparing Trump and House GOP Proposals

President-elect Donald Trump is not the only Republican who has proposed changing tax laws. GOP leadership in the House of Representatives has rolled out a tax blueprint that is directionally similar to Trump’s proposal but includes some key differences. These differences provide insight into what issues could be on the bargaining table once the legislative process begins. The table below compares some of the key elements of both proposals.

Income Tax Brackets and Rates

Issue Trump Proposal House GOP Blueprint
Ordinary income rates and tax brackets 12%, 25%, and 33% Same as Trump
Net investment income tax (3.8%) Repeal Same as Trump
Long-term capital gains and qualified dividends Retain current law (20% top rate) Effective rates of 6%, 12.5%, and 16.5%
Interest income 12%, 25%, and 33% Effective rates of 6%, 12.5%, and 16.5%

Pass-Throughs, Itemized Deductions, and Estate Tax

Issue Trump Proposal House GOP Blueprint
Pass-through income • 15% rate available to S corporations and other pass-through entities that want to retain business profits
• Large pass-through entities subject to second-level tax on distributions
Top rate of 25% on business income from pass-through entities
Itemized deductions Cap at $100,000 (single) or $200,000 (married) Eliminate all deductions other than mortgage interest and charitable contributions
Estate tax Repeal, but tax appreciated assets in excess of $10 million Repeal

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