Beyond the Election

Beyond the Election

Beyond the Election: Year-end Tax Moves are Back in Style!

With the aftershocks from the November 8th elections still reverberating both across America and around the world (the true shock, of course, being that punditry and “conventional wisdom” were once again proven so terribly wrong!), one thing has become crystal clear – we’re all headed in a new direction with public policy.

The headlines are filled with the Trump win over Clinton as well they should be.
Yet the breadth and depth of the change should not be overlooked. Of the 99 state legislative chambers (Nebraska’s is unicameral: no separate senate and house) in the country, 69 are now majority Republican.  Only 6 states remain in which the Democrats hold the governorship and majorities in both houses.  By comparison, Republicans control all 3 now in 25 states.[i]  Most importantly, Republican majorities were held in both the U.S. Senate and House: important elements to the coming Trump administration’s efforts to enact their policy agenda.

Tax changes are coming: Although many legislative efforts could be blocked by a Democrat filibuster in the Senate (which would require 60 votes to end; Republicans will hold 52 seats in the new Senate), tax changes will not, since they will be a part of the overall budget and are therefore under the “reconciliation” exemption per Senate rules, meaning tax changes need only 51 Senate votes.  That paves the way for a package of tax reforms.  While we won’t know the exact details for many weeks – the Senate and House will no doubt make many changes to the plan Trump put forth during the election – we can anticipate some provisions and the general direction they will take:

  • Income Tax Rates – lower
  • Capital Gains Tax Rates – lower
  • Effective Date – quite possibly retroactive to January 1, 2017

Based on these fundamental assumptions, we can then surmise – in most, if not all cases – the usual tack of accelerating deductions/postponing income will be especially heightened this year end, since, at lower tax rates, tax deductions in 2017 and beyond will be worth less than those same expenses in 2016.  What deductions can be moved up into 2016? Several are possible, but the easiest to shift is for charitable contributions: consider making gifts planned for 2017 here in the final month of 2016. Moving up giving even multiple years into 2016 is possible and can be facilitated via Donor Advised Funds.  Check with us if you think this approach might apply in your situation.

What about delaying income past 12/31/16? Likewise, while many strategies are possible, the easiest to control is to sell no investment positions with gains (and, inversely, to consider selling positions with losses, thereby “harvesting” them, as the technique is called) until the new year.  Here, too, we stand ready to help you sort out your specific situation and best strategy.

BOTTOM LINE: Review your situation and plan to act before the end of 2016!
This “Cyber Monday” sale on taxes will be extended through December…but then be gone forever! ...or at least until another tax-cutting comet flashes over Washington (of which there have been very few sightings in history).


i[i] “These 3 Maps Show Just How Dominant Republicans are in America after Tuesday,” Washington Post, November 12, 2016

Meet the team

Have you met our team?

We have a wealth of experience in the financial services industry.

Website Design For Financial Services Professionals | Copyright 2020 All rights reserved