Early voting for the 2024 election has already kicked off in some states, but voters are still seeking additional information on the candidates’ platforms, including their tax proposals. The details can be hard to come by — and additional proposals continue to emerge from the candidates. Here’s a breakdown of some of the most notable tax-related proposals of former President Donald Trump and Vice President Kamala Harris.

Expiring provisions of the Tax Cuts and Jobs Act (TCJA)

Many of the provisions in the TCJA are scheduled to expire after 2025, including the lower marginal tax rates, increased standard deduction, and higher gift and estate tax exemption. Trump would like to make the individual and estate tax cuts permanent and cut taxes further but hasn’t provided any specifics.

As a senator, Harris voted against the TCJA but recently said she won’t increase taxes on individuals making less than $400,000 a year. This means that she would need to extend some of the TCJA’s tax breaks. She has endorsed President Biden’s 2025 budget proposal, which would return the top individual marginal income tax rate for single filers earning more than $400,000 a year ($450,000 for joint filers) to the pre-TCJA rate of 39.6%.

Harris has also proposed increasing the net investment income tax rate and the additional Medicare tax rate to reach 5% on income above $400,000 a year.

Business taxation

Trump has proposed to decrease the corporate tax rate from its current 21% to 20% (or even lower for companies making products in America). In addition, he’d like to eliminate the 15% corporate alternative minimum tax (CAMT) established by the Inflation Reduction Act. On the other hand, Harris proposes raising the corporate tax rate to 28% — still below the pre-TCJA rate of 35%. She has also proposed to increase the CAMT to 21%.

In addition, Harris has proposed to quadruple the 1% excise tax on the fair market value when corporations repurchase their stock, to reduce the difference in the tax treatment of buybacks and dividends. She would block businesses from deducting the compensation of employees who make more than $1 million, too.

In another proposal, Harris said she’d like to increase the current $5,000 deduction for small business startup expenses to $50,000. The proposal would allow new businesses to allocate the deduction over a period of years or claim the full deduction if they’re profitable.

Individual taxable income

Trump has proposed to eliminate income and payroll taxes on tips for restaurant and hospitality workers. Harris has proposed exempting tips from income taxes. But some experts argue that such policies might prompt employers to reduce tipped workers’ wages, among other negative effects. Harris’s proposal also includes provisions to prevent wealthy individuals from restructuring their compensation to avoid taxation — by, for example, classifying bonuses as tips.

Trump recently proposed excluding overtime pay from taxation. Experts have similarly said this would be vulnerable to abuse. For example, a salaried CEO could be reclassified as hourly to qualify for overtime, with a base pay cut but a dramatic pay increase from overtime hours.

In another proposal, Trump said he would like to exclude Social Security benefits from taxation.

Child Tax Credit

Trump’s running mate, Senator J.D. Vance, has proposed a $5,000-per-child Child Tax Credit (CTC). However, it’s unclear if Trump endorses the proposal. Of note, Senate Republicans recently voted against a bill that would expand the CTC.

Harris has proposed boosting the maximum CTC from $2,000 to $3,600 for each qualifying child under age six, and $3,000 each for all other qualifying children. She would increase the credit to $6,000 for the first year of life. Harris also favors expanding the Earned Income Tax Credit and premium tax credits that subsidize health insurance.

Capital gains

Harris proposes taxing unrealized capital gains (appreciation on assets owned but not yet sold) for the wealthiest taxpayers. Individuals with a net worth exceeding $100 million would face a tax of at least 25% on their income and their unrealized capital gains.

Harris is also calling for individuals with taxable income exceeding $1 million to have their capital gains taxed at ordinary income rates, rather than the current highest long-term capital gains rate of 20%. Unrealized gains at death also would be taxed, subject to a $5 million exemption ($10 million for married couples) and certain other exemptions.

Housing incentives

Trump has alluded to possible tax incentives for first-time homebuyers but without any specifics. The GOP platform calls for reducing mortgage rates by slashing inflation, cutting regulations and opening parts of federal lands to new home construction.

Harris proposes new tax incentives intended to address housing concerns. Among the proposals, she would like to provide up to $25,000 in down-payment assistance to families that have paid their rent on time for two years. She’s also proposed more generous support for first-generation homeowners. In addition, she proposes a tax incentive for homebuilders that build starter homes for first-time homebuyers.

Tariffs

Trump repeatedly has called for higher tariffs on U.S. imports. He would impose a baseline tariff of 10%, with a 60% tariff on imports from China. (In speeches, he’s proposed a 100% tariff on certain imported cars.)

Trump has also suggested eliminating income taxes completely and replacing that revenue through tariffs. Critics argue that this would effectively impose a large tax increase (in the form of higher prices) on tens of millions of Americans who earn too little to pay federal income taxes.

The bottom line

As of this writing, nonpartisan economics researchers project that Trump’s tax and spending proposals would increase the federal deficit by $5.8 trillion over the next decade, compared to $1.2 trillion for Harris’s proposals. That assumes, of course, that all the proposals actually come to fruition, which depends on factors beyond just who ends up in the White House. Congress would have to pass tax bills before the president can sign them into law. Turn to us for the latest tax-related developments.

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Divorce entails difficult personal issues, and taxes are probably the farthest thing from your mind. However, several tax concerns may need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are six issues to be aware of if you’re in the process of getting a divorce.

1. Personal residence sale

In general, if a couple sells their home in connection with a divorce or legal separation, they should be able to avoid tax on up to $500,000 of gain (as long as they’ve owned and used the home as their principal residence for two of the previous five years). If one former spouse continues to live in the home and the other moves out (but they both remain owners of the home), they may still be able to avoid gain on the future sale of the home (up to $250,000 each), but special language may have to be included in the divorce decree or separation agreement to protect this tax exclusion for the spouse who moves out.

If the couple doesn’t meet the two-year ownership and use tests, any gain from the sale may qualify for a reduced exclusion due to unforeseen circumstances.

2. Pension benefits

A spouse’s pension benefits are often part of a divorce property settlement. In these cases, the commonly preferred method to handle the benefits is to get a “qualified domestic relations order” (QDRO). This gives one former spouse the right to share in the pension benefits of the other and taxes the former spouse who receives the benefits. Without a QDRO, the former spouse who earned the benefits will still be taxed on them even though they’re paid out to the other former spouse.

3. Filing status

If you’re still married at the end of the year, but in the process of getting divorced, you’re still treated as married for tax purposes. We’ll help you determine how to file your 2024 tax return — as married filing jointly or married filing separately. Some separated individuals may qualify for “head of household” status if they meet the requirements.

4. Alimony or support payments

For alimony under divorce or separation agreements that are executed after 2018, there’s no deduction for alimony and separation support payments for the former spouse making them. And the alimony payments aren’t included in the gross income of the former spouse receiving them. (The rules are different for divorce or separation agreements executed before 2019.) This was a change made in the Tax Cuts and Jobs Act. However, unlike some provisions of the law that are temporary, the repeal of alimony and support payment deduction is permanent.

5. Child support and child-related tax return filing

No matter when the divorce or separation instrument is executed, child support payments aren’t deductible by the paying former spouse (or taxable to the recipient). You and your ex-spouse will also need to determine who will claim your child or children on your tax returns in order to claim related tax breaks.

6. Business interests

If certain types of business interests are transferred in connection with divorce, care should be taken to make sure “tax attributes” aren’t forfeited. For example, interests in S corporations may result in “suspended” losses (losses that are carried into future years instead of being deducted in the year they’re incurred). When these interests change hands in a divorce, the suspended losses may be forfeited. If a partnership interest is transferred, a variety of more complex issues may arise involving partners’ shares of partnership debt, capital accounts, built-in gains on contributed property and other complex issues.

A range of tax challenges

These are just some of the issues you may have to cope with if you’re getting a divorce. In addition, you may need to adjust your income tax withholding, and you should notify the IRS of any new address or name change. There are also estate planning considerations. We can help you tackle the financial issues involved in divorce.

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Navigating the complexities of tax law can be difficult, especially when faced with an unexpected tax bill due to the errors of a spouse or ex-spouse. The reason for such a bill has to do with the concept of “joint and several” liability. When a married couple files a joint tax return, each spouse is liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax — not just the part that’s attributed to one spouse or the other. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest.

There may be relief

In some cases, spouses are eligible for “innocent spouse relief.” This generally involves an individual who was unaware of a tax understatement that was attributable to his or her spouse. To qualify, you must show that you didn’t know about the understatement and that there was nothing that should have made you suspicious. In addition, the circumstances must make it inequitable to hold you liable for the tax.

This relief is available even if you’re still married and living with your spouse. In addition, individuals may be able to get relief for tax deficiencies on joint returns if they’re divorced, widowed, legally separated or living apart.

Recent court cases

Not surprisingly, the issue of innocent spouses is frequently litigated. Here are some cases from this year:

• Taxpayer wins. In one case, it was undisputed that a married couple’s joint tax return included an understatement of tax. The IRS and the wife agreed that she didn’t know, or have reason to know, that the correct amount of taxes wasn’t paid. She wasn’t involved in her now ex-husband’s employment or business activities. He concealed his finances from her and kept separate bank accounts. The U.S. Tax Court weighed all factors and found it would be inequitable to hold her liable for the deficiency. Her request for innocent spouse relief was granted. (TC Memo 2024-26)
• Taxpayer loses. In another case, a widow argued that if she paid the taxes owed by her deceased husband, she’d suffer economic hardship. Her annual income, she testified, was far below the poverty line and her assets were insufficient to pay the taxes. However, she failed to provide evidence to support her income or the value of her two homes. Records showed that while her income taxes remained unpaid, she enjoyed significant benefits, including several expensive vacations and the purchase of a luxury vehicle. The U.S. Tax Court denied her request for relief. (162 TC No. 2)

An “injured spouse”

In addition to innocent spouse relief, there’s also relief for an “injured spouse.” What’s the difference? An injured spouse claim asks the IRS to allocate part of a joint refund to one spouse. In these cases, all or part of an injured spouse’s refund from a joint return is applied against past-due federal tax, state tax, child or spousal support, or a federal nontax debt (such as a student loan) owed by the other spouse. If you’re an injured spouse, you may be able to recoup your share of the refund.

A challenging process

Whether, and to what extent, you can take advantage of the above relief depends on the facts of your situation. If you’re interested in trying to obtain relief, there’s paperwork that must be filed and deadlines that must be met. We can assist you with the details.

Also, keep “joint and several liability” in mind when filing future tax returns. Even if a joint return results in less tax, you may choose to file a separate return if you want to be certain you’re responsible only for your own tax. Contact us with any questions or concerns.

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Many employees began working remotely during the pandemic and continue doing so today. Remote work has many advantages for employers and employees, and as a result, it’s here to stay in many industries. But it may also lead to some tax surprises, especially if workers cross state lines.

Double taxation may occur

It’s not unusual for employees to work remotely for an employer in another state. For some businesses, remote work has become a permanent arrangement that allows employees to live and work further away from a physical office.

If you live in one state and work remotely for an employer in another state, familiarize yourself with the tax laws in both states and determine how they may affect you. For example, you may need to file income tax returns in both states, which could result in increased — or even double — taxation.

Here’s the problem: A state generally has the power to tax the incomes of people who are domiciled in it as well as people who reside there. Domicile is a state of mind and is often based on a person’s intent to make a location his or her “true, fixed, permanent home.” Residency is based on physical presence in a state for a certain amount of time (typically, 183 days per year).

It’s possible to be domiciled in one state and a resident of another. For example, let’s say you have a permanent home in one state where your job is located and a vacation home in another state. Your employer allows employees to work remotely, so now you spend more than 200 days per year living and working at your vacation home. The state where your permanent home is located considers you to be domiciled there, but the state where your vacation home is located views you as a resident. So you may be subject to taxes on the same income in both states. You could avoid double taxation if one or both states provide credit for tax paid to other states. But your tax bill may still increase if, for example, one state’s income tax rate is significantly higher than the other state’s rate.

Complications for employers

From an employer’s perspective, allowing employees to work remotely may create obligations to withhold and remit income and payroll taxes in several states. Plus, having employees in other states may be sufficient to establish “nexus” with those states, potentially triggering liability for their income, franchise, gross receipts, or sales and use tax. In addition to the expense of tax reporting in multiple states, this may increase an employer’s overall tax liability. There are other complications as well.

Business expense deductions

Under current law, employees generally can’t deduct unreimbursed job-related expenses. Years ago, employees could claim certain costs as miscellaneous itemized deductions, which are deductible to the extent they exceed 2% of adjusted gross income. But those deductions were eliminated for 2018 through 2025.

Remote workers typically aren’t eligible for the home office deduction either. That deduction is generally limited to self-employed business owners. Prior to 2018, employees could claim the deduction if, among other things, they worked at home “for the convenience” of their employers. But that deduction was also eliminated for 2018 through 2025.

Employers may reimburse remote workers for their business expenses according to an “accountable plan” that requires employees to substantiate expenses and meet other requirements. Properly reimbursed expenses are deductible by an employer and excludable from an employee’s income.

Be aware of the consequences

If you’re a remote worker or own a business that employs remote workers, be sure you understand the tax implications. In some cases, you may be able to take steps to minimize them. But even if you can’t, it’s important to know what to expect.

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