How to Take Advantage of Trump’s Tax Proposal
Despite a certain lack of detail on President Donald Trump’s tax proposal unveiled last month, financial advisors can still help clients take advantage of the plan, the Wall Street Journal writes.
Advisors may want to suggest their clients make charitable contributions now rather than wait till next year, Karen Altfest, executive vice president at Altfest Personal Wealth Management, tells the paper. That’s because while Trump’s plan leaves charitable deductions as they are, his plan would also double standard deductions from their current levels, the Journal writes. That could leave fewer people needing to take advantage of the charitable deduction, according to the paper. Deductions against this year’s taxes could benefit top earners more if their rates drop next year, experts tell the Journal.
It could also make sense for some clients to defer income to next year if they can, Jeff Fosselman, a senior wealth adviser at Relative Value Partners tells the paper.
The elimination of certain taxes – such as the surtax on net investment income – could yield significant savings, he says.
Now may also be a good time to set up a business, the Journal writes. One of Trump’s proposals is to put a cap of 15%, compared to the current 39.6%, on taxes on pass-through entities, such as S corporations, partnerships and limited liability companies. Pass-through entities are popular not just with small businesses such as law firms and accounting practices, but also wealthy individuals who want to protect themselves from personal liability or shield their identity in certain transactions, the Journal writes.
Regardless of what happens to the estate tax, which Trump proposed killing, this could be a good year to set up an estate plan, according to the paper.
Trump’s eventual tax plan may include the elimination of the step-up in basis, which allows heirs to avoid paying a capital-gains tax on assets by adjusting the value of the asset to its value when it was inherited, Altfest tells the paper. Any benefits of holding an asset until death, therefore, would disappear, she says.