Trump’s Tax Proposal Could Be Boon for RIAs
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.
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.