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Trump’s Tax Proposal Could Be Boon for RIAs

April 28, 2017

President Donald Trump’s tax proposal released earlier this week could benefit RIAs — and many of their clients — thanks to a cap on pass-through entity taxes, InvestmentNews writes.

In addition to proposing a cut to the corporate tax rate to 15%, Trump’s plan also includes a 15% cap on pass-through entities used by RIAs and most small-business owners, such as S-corporations, limited partnerships and limited liability corporations, according to the publication. Currently, pass-through entity income is tacked on to all other income of a business owner and then taxed at the individual tax rate. That can be as high as 39.6%, InvestmentNews writes.

But the cap is far from a done deal, industry experts tell the publication. For starters, it may take months for a final tax plan to emerge, InvestmentNews writes.

Meanwhile, the pass-through tax cap is seen as a way to appease small business owners as Trump cuts taxes for corporations, according to the publication.

President Donald Trump (Getty)

But it’s the top 1% of taxpayers who collect two-thirds of pass-through income, John Nersesian, head of the wealth management unit at Nuveen, tells InvestmentNews. Moreover, lost tax revenue from pass-through income must be replaced somehow, Peter Creedon, CEO of Crystal Brook Advisors, tells the publication. Furthermore, not all advisors necessarily benefit from the cap; Kashif Ahmed, president of American Private Wealth, tells the publication his and his wife’s effective tax rate has already been under 15% for many years.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.