Tax Tips for a Donald Trump Presidency

Newly elected president elect of the United States Donald Trump along with his congress controlled by Republicans have already stated that tax reform is a high priority of things to get accomplished next year. Some of the items on the agenda include repealing the estate tax, lowering top income tax brackets, and consolidating income tax rates.

While there is no certainty that any concrete reform will take place next year, most financial advisors are betting there will be tax legislation that gets passed soon and are urging their clients to make some moves before the year ends. Some of these include:

Speed up Tax Deductions

President elect Trump is looking to reduce the top income tax rate from 39 percent to 33 percent. He wants to consolidate the current seven marginal brackets into 3. Those who would pay a lower rate under this plan should consider taking deductions at the end of 2016 instead of waiting until next year. The reason for this is because tax deductions such as for charitable gifts and mortgage payments will be worth more under the current higher rate.

Don’t Purchase Capital Assets

Under current tax laws the IRS states that tax deductions for a capital investment can be taken out over a number of years. Trump’s plan states that taxpayers will be able to immediately take out the deduction for the entire asset at soon as it is purchased. For example, if you purchase a $100,000 tractor in 2016 it will depreciate over the next decade, causing a lower right off. If you wait and purchase the same tractor in 2017 and Trumps revision is successful you would be able to immediately deduct its full value.

Use a Trust to your Advantage

President elect Trump has stated that he wants the estate tax to be repealed. This is currently a 40 percent tax on estates that are worth more than $5.45 million. This leaves the potential for there being no tax on the estate, but instead a capital gains tax on the appreciation of the asset.

One way to avoid this is by putting $5.45 million of appreciated stock into a dynastic irrevocable trust. This would not be subject to either the capital gains or estate tax. A power of substitution can be drafted in order to provide flexibility to switch out the stock for cash in the future.

These are just a few of the things that Trump has suggested may be in the works. No matter what, we all know that some drastic changes to our current tax laws are coming sooner rather than later as the Republicans have made this extremely clear.

In order to best meet your financial needs, make sure that you have a personal account advisor available to help you with all of your investment needs. Companies such as Glenmore Investments have made this a staple of their financial services and any company that you choose should do this as well.