Okay, we are on the 10 out of 10,
the Trump vs. Harris tax battle. This one's,
this one's gonna be fun. Like, this, this one will be pretty fun to
go over because I'm, I'm gonna introduce you to the different tax personas,
which is like an avatar for, like, the type of taxpayer that you are.
And how these different strategies,
or not the strategies, but how each of these different tax policies will impact
you. And I'll just give you my opinion on who I think it's gonna
benefit, uhm, I'll let you know who I think kinda won in the tax
battle, whether it's Trump or Harris, or if it's a I'm gonna let the
cat out of the bag a little, it's, some of these are a tie,
where I couldn't really, yeah,
couldn't really determine for sure whether or not, uh,
one of them wins over the other one. So, each of these personas,
so I've got five different personas, and these I've just kinda like lumped,
we, we've been working with clients for so long. I've just kinda like lumped,
kinda the type of clients that we work with,
and so you might identify with some of them directly,
or you might identify, like, with, uhm,
a few of them, but it's kinda, some of it is based on income
level, but it's more of like the different activities. So, let me,
let me introduce you. We'll get into the five different,
uh, type of tax personas,
and we will go, we'll go from there. So, the, the first one is,
uh, his name is Erwin,
and we call him Investor Erwin,
and I'm, I'm gonna list them out, then I'll, I'll give you a little
more background and details on them. The second one is employee Ed.
Third one is retired Roger. We've got,
the fourth is self-employed Sheila,
and the last one is high net worth Helen.
So, the name kind of does give away,
like the type of tax persona that they might be,
so you think, like, I'll go back to the first one.
Investor Irwin, so investor Irwin is a real estate investor,
a regular investor, like in stocks,
likely invest in cryptocurrency, but it's just like the type of income that he'd
be earning. So real estate, think of real estate in capital gain income,
dividend income. Uh, uhh, uhh, into someone that's an investor.
So in this, there's a,
kind of some of the, the main tax policies that would impact investor Irwin.
One of them would be the capital gains tax. So on the Trump policy,
a capital gains tax, right? It, like,
we're seeing that it would likely be the The same as it is now,
which is a 20% top tax rate when you make over $400,000.
And under the Harris proposals or potential proposals,
over a million dollars of income, it's going to jump up to a 28%
tax rate. And under.
Like, if it's, so if it's under the million under the Harris side,
I'd expect it'd probably be about, it'd probably be the same as it is
now, but we're not. Yeah, can be 100% certain on that.
But if it's less than. Like right now,
so under the Trump policy, if it's less than. Umm,
it's, we have the $400,000 limit.
If it's less than that, it's a 15% capital gains rate.
And if it's less than about, if you, if you're single file,
single tax return, if you make less than about 50,000,
that's a 0% capital gains rate. But I think those lower brackets would be
the same for both. But just think like those top brackets,
if you're in those high income brackets over 400,000,
it's 20% for Trump. And over a million dollars is 28% for,
for Harris. So if you, or if you were selling a business or selling
cryptocurrency, selling stocks, that's when that's going to pack to you.
And then for as an investor,
so this is, I'm lumping in real estate investors under the investor Erwin.
As a real estate investor, the Trump's policies are going to,
are going to benefit Erwin. Much better.
We've talked about that. We've talked about the bonus depreciation,
accelerated depreciation, uh,
cost. Aggregations will likely be better under the Trump policies.
And that's just because we know what was changed in 2018 under those Trump
tax cuts. On the Harris side.
Oh, is there something I had that was better?
There is actually, we'll talk. Well, that in the self employment one.
Um,
but that's it for those are the main ones I'll mention. So on that
one, I would say under investor Irwin,
Trump gets the Trump gets the point for that.
Okay, so the second one is employee Ed.
So employee Ed, it's someone that's an employee works for someone else.
They're not self-employed. Not a real estate investor.
Not, not high net worth. And I'm, I'm gonna just say they're,
they're less than the $400,000 of income.
Because that's under the Harris proposal. She's come out and said,
under $400,000 of income, she's not gonna be raising any,
any, any taxes for those people. Umm,
so here's, it's, you might think,
so initially it was like, oh yeah, well Harris will win this one.
And, It's, yeah. In the end,
it ends up as a tie, but let me, let me explain why it
ends up as a tie. And this is, they were probably looking at the
tax personas when the, that the Trump team is coming out with some of
their proposals. But like, the good things about,
on the Harris side, before employees. We had like the things to watch for,
like, if she was voted as president,
uh, the increased child tax credits going up to,
they're like $2,000 per child.
Now they'd go up to $3,000 or $3,600 per child going
in the future for Ed. And the other big part of hers is the
earned income tax credit. And the earned income tax credit,
this is going to be for low income, low income,
uh, tax payers, so like $50,000 range and less because
with your higher than 50 thousand, you're not going to qualify for the earned
income credit anyways. But increasing the age and income,
increasing the income level is what we'd expect on that.
But like, it's not, we wouldn't expect it like an income over a hundred
thousand. But you never know,
never say never. So those are the good.
Fit things on the hair side or an income credit and child tax credit.
But then on the Trump side, so he came out and it said at
like three thousand or thirty six hundred, we covered this in one of those
last episodes. The Trump policy for child tax credits would be up to like
five thousand dollars per kid. Which is more.
Which is probably trying to come back in the hair side and trying to
get some of those votes. Of course. Umm,
nothing about the earned income credit. Like expanding it on the Trump side that
we've seen. But then here's, here's the big one that in my opinion created
the tie on the Trump side. Was the tax-free overtime and the tax-free tips.
So someone that's making 50, 60,
70, 80, $100,000 a year. Could be working,
likely working overtime. Or could be working overtime.
The lower income could be earning some tips. So it's,
and, and all those. Would be tax-free.
So I just, with employee ed,
this one was hard to decide,
but I think it's, I think it is a tie. I mean, I,
um,
yeah. So really, no one gets a point on that one.
I'm, I'm not going to do half points or anything. So Trump still has
that first point from the investor Erwin.
And then you go to the third one. So the third one on the
list is retired Roger. So this is someone that's retired,
minimal amount of investments, kind of just in a broker account.
But someone that's living on the retirement, they've got pensions and social security is
a. Big part of, of what they're earning.
And so under the Trump proposal,
another thing that we've talked about was that there were tax free,
there was a proposal about tax free social security.
And remember, like, I think I gave my opinion on this that.
Social security is taxes,
they're taxes essentially that you've had withheld from your pay over the 10,
20, 30 years of, of your working time withheld from your W2 paychecks.
And then when you get it back in retirement, you're paying taxes on that.
Um, it gets a little, a little more complex.
Like, it's not super simple in the calculation because not all of it is
taxable. Up to 85% can be taxable if you have any other income.
So in this retired Roger does have some other income,
so we was paying tax on it. And so if you come out with
tax-free Social Security. It's saving them all the tax and the Social Security.
But someone that is only on Social Security and like no other income,
they're not paying tax anyways on Social Security.
They're not, they're not paying taxes on it because they don't have any other
income. Like Social Security can be tax-free already.
Like under current law if you have no other income.
Um, and then related to Social Security,
Harris hasn't come out and said anything specific about Social Security.
Uh, but here's, here's the other part with someone that's retired and
planning with like doing their wealth or their estate.
Planning under the current tax proposals is the death tax and estate tax
that I talked about in one of the episodes. But under the current,
the just the current tax laws that is now it's about a $13,000
around $13,000 $13,000 limit.
On how much value, how much net worth you can die with tax-free.
And if you remember, there's that, that's the threshold.
If you died with $14,000,000 of net worth,
that extra million would be subject to estate tax.
And you pay 40% of the excess over your $13,000,000 lifetime limit.
Under the, umm,
under the Harris proposals, we'd expect that they would try to roll back the
estate tax limitation, and it would go back,
likely revert back, back to the $6 million limit.
And, I believe it, that's, that's just the autumn.
That's just what it's defaulting to when the Trump tax cuts expire.
So we, we, we would just expect that the Trump tax cuts don't get
extended, and it would just revert back to what it was before.
But who knows, a year from now, they're gonna be,
yeah, creating all sorts of tax laws.
So I'm, Sure, and we don't exactly know where they're gonna be.
But for some of this retired, because of the tax-free retirement,
it's just so much more flexibility in that with tax-free retirement.
And because of the estate tax limitation, uh,
still being at that $13 million threshold.
Retire, Edward Roger would benefit more under the Trump tax proposals.
So Trump got a point on the first one,
and now the third one, Trump has two points. And they,
they tied that second one. Okay,
so number, this is the fourth one.
So this is self-employed Sheila.
And self-employed,
self-employed Sheila is someone that's a freelancer.
They've got a small business, maybe a couple employees,
but just small business owners, not like some massive corporation,
not, not a billionaire, not, yeah.
Just not some massive company, but they could have several,
several employees, making a few hundred thousand dollars a year,
or from fifty thousand to a few hundred thousand dollars a year,
just a very common sized business owner.
And under the Trump tax proposals,
there was the you would talk about this, but the QBI deduction,
the qualified business income deduction, that's a twenty percent deduction on your net income.
So, so say Sheila makes two hundred thousand dollars of just
top line revenue with the business has a hundred thousand dollars of expenses.
She gets to net tax blimp come of a hundred thousand.
There's a QBI deduction that's twenty percent deduction calculated on that.
It's a twenty thousand dollar free deduction. And so she would only pay tax
on eighty thousand instead of a hundred thousand. So that,
that was part of the Trump tax cuts back in twenty eighteen.
So if that's expires under the Harris proposal,
we're just assuming that that's not going to be renewed.
And so she's, it's kind of weird with these proposals,
but where it's like, they're not going to come out and say things that
they're going to take away. They're, they're mentioning things that they're adding.
And so some of this is, is. assumption, of course, but under the Harris
proposal for someone like self-employed Sheila, she had mentioned the $50,000
startup deduction. And remember,
under current law, you can, like, try to start a business.
And if you spend up to $5,000 or there's a limit.
Where, however much you spend, the first $5,000 can be a deduction in the
first year. Meaning that it just, it just offsets your taxable income and maybe
saves you a couple thousand in taxes. Under,
and that's, you can deduct that even if you don't actually start the business.
Or it doesn't open its doors. And you're still working through the kinks to
launch the business. Under the Harris proposal,
this is one of the bigger ones that she had mentioned,
where the startup business deduction was $50,000,
which is what she proposed. Instead of a $5,000 limit,
the first $50,000 could be a deduction, like while
you're in that startup phase, like you're trying to start the business,
haven't officially launched it. And even when you do officially launch it,
you're not limited. You don't have to take that over a long period of
time. You can just deduct it to offset your,
your other income in that first year. So that's that's that's.
That helps a lot. That helps a lot with the,
with just cash flow, like the cash flow crunch for new businesses.
Um, I think it could have a very positive impact on small businesses,
but that is a large amount. Not, not a lot of people are spending,
uh, $50,000 just to see
if they can start a business. But for those that are,
it would be very helpful. Uh,
the other part with, uh, with the Harris proposals was a standard
deduction for businesses. So remember, we have an itemized deduction,
a standard deduction for personal. Taxes,
where everyone gets a $15,000 deduction,
just tax-free income you can earn, like $15,000 on the personal side.
But on the business side, we haven't had that. The Trump proposal,
we're not the proposal, but just the Trump QBI deduction,
the 20% deduction. We'll kind of.
We're to have a similar impact. But on the Harris side,
we don't know how much just the tax-free income a business can earn yet.
But I think it's a great idea. Like, I think it could help small
business. Like, cause we see is like in the CPA firm,
we see business owners, especially small business owners,
like they need. They're bookkeeping done, but it costs quite a
bit. Like, if you want a good bookkeeper and have good records,
like, that's just an added cost that it's just sometimes hard for them to
cover. Um,
so you have with, with self-employed Sheila, so I talked about the Trump,
uh, the QB ID.
Um, yeah,
for like those, for those small, self-employed people.
And actually, on this one, so I'm ignoring bonus depreciation.
Like, I'm, I'm ignoring, like, those accelerated deductions that are depreciation
related. Kind of left that on the investor Erwin side.
And so because of the startup expense deduction and
the standard, like the standard business deduction,
I'm going to go with Harris. I'm going to give Harris a point on
this one. And so we've got Trump's got two point.
It's, there was a tie and then Harris,
I give Harris the point on this number four. Okay,
so now we've got this last one.
This last one is her name is Helen.
This is high net worth Helen. And if you just think of,
think of all the personas that we've covered, we had Erwin.
And we had employee Ed, we had her tired Roger and self-employed Sheila.
Just think of high net worth Helen as being all of those,
like just being all of those, but add some net worth to,
to them and add some more assets, add a few more years,
add a few more gray hairs. High net worth Helen is.
Someone that has done all of it, and they've got their hands and a
lot of investments, a lot of moving pieces. This is like,
there's a lot more strategic tax planning to do.
There could be some multiple layers of corporations and partnerships and fund raisings.
It's just. In my opinion,
it's the funnest person to do tax planning with, because there's so many moving
pieces, and as you know, like, like, wealth game.
I view the game of wealth and tax planning and strategy as a game,
and I just like all the moving pieces.
It's like, we're playing chess. Um,
so to. Go over just, again, kind of some of the high level things,
which we've talked about. But under the Trump side,
we've got the, the estate tax limitation being high.
Someone in high, someone that's high net worth, that is going to be very
valuable for them. If they die more than that $13 million in net worth.
They do not want to pay in the state tax of 40% on the
excess. So, the higher the limit,
the better. Umm, remember with the,
there's that $10,000 cap, the limit of the deduction for how much you pay
in property taxes and, uh, property taxes and,
that income tax, that's the deduction, your personal tax return.
There's no cap under what we're expecting on the Trump side.
We're expecting that will be removed compared to the current cap,
which is $10,000. So that's, there's a lot of value.
Like, there's a $10,000 cap for someone that's high net worth.
Like, just say some, some of this high net worth and high income,
say they make a million dollars in a year,
and they have a couple million dollar house.
They could be paying $50,000 in income tax,
like state income tax on that income.
They could have $50,000 of property tax. Taxes across multiple houses.
That could be $100,000 deduction compared to the $10,000 limit.
So that could mean $20,000 or $30,000,
$20,000 or $40,000 of tax savings to them.
Just from that, just from removing that limitation on the,
the state. And the property tax deductions.
Okay. And then on the Harris side,
it's kind of, these aren't really proposals to benefit
high net worth people. These are kind of proposals that would be a detriment
to the high net worth people. But, um,
she has discussed. Like a minimum tax on wealthy,
a minimum tax on billionaires,
unrealized gain tax. And of course,
the higher capital gains tax rates. Um,
stock, there's a stock buyback tax.
Like, instead of being able to take, um,
like some. Distributions on corporations or,
uh, the way that, uh,
income comes back from corporations. They've added back some,
like, potential stock buyback tax.
So it's, there's not, there's not a lot that I've seen that someone that's
high net worth, that was. They have a benefit for under the Harris proposals
and they've come out and said it. Anyone that makes more than 400,000 is
going to have higher taxes. Um,
and then, yeah, it's kind of, there's kind of a lot of the anti
billionaire stuff going on as well. So in this number five,
Trump gets the point for this. So under.
For people that are investors, for investor Irwin,
people that are in real estate, I've given Trump the point for that.
For employee, for someone that's an employee,
I've given it a tie. And that's low,
low to mid to high impact, like wage earners.
I've given. And that a tie between Trump and Harris. And someone that's retired,
I've given Trump the point for that. Someone that's self-employed,
I've given Sheila the point for that. Or I've given Harris the point for
the self-employed Sheila. And of course,
the high net worth, uhm, the point goes to Trump.
So Trump has won the Trump vs.
Harris tax battle. Trump has three points.
Harris has one point. And that last point was just a tie.
But really, the reason I did this,
and I like, yeah, I hope you've enjoyed kind of me talking through these
different personas because it really. It really does depend.
And there's a lot more than five personas, of course.
But I want you to think about the tax law,
like, when you think about the tax law,
like, um,
yeah, like you're not fitting yourself in a specific thing,
but more of like, you're impacted it, you're impacted by the tax.
It's not law by what you are doing in,
like, in a certain year. Like, it can change year to year.
So one of the biggest things that I talk with clients about is,
like, just changing what you're doing, change your circumstance,
change your facts, change your entity structure,
add an entity. Change the way that you're earning your income.
You can move a few episodes ago, talked about how you can change your,
like, the type of income you're receiving can be taxed differently.
But I just want people to think about it strategically.
That's the whole goal of this.
Just think about it. strategically. You and I directly were likely
not going to have a direct impact on how the tax law is written,
but our responsibility is understand it,
compare it or apply it to our situation,
and just try to get the best possible.
bowl. Outcome based on our scenario and based on our understanding of the tax
law. So that's it. That's the Trump verse Harris tax battle.
Hope you've enjoyed it. And I hope we,
uh, yeah, I enjoy election day as much as possible,
but I'm sure a lot of us are 3 3 5 We'll see happy
to just have it behind us and just be able to move on from
there. But yeah, have a great rest of the day.
See you.
