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Nominations Official, Trump, Clinton Offer Different Visions on Tax Policy

Aug 15, 2016

Now that Donald Trump and Hillary Clinton have accepted their respective parties’ nominations, it bears taking a closer look at how their tax policies may impact the valuation profession. While the candidates differ on their treatment of estates, surprises loom in one key area for professional appraisers.

As part of his official platform, Mr. Trump would eliminate the estate tax for all Americans. He would also reduce the income brackets from seven to four, and would broaden the applicability of the highest long term capital gains tax rate (20%) to single filers making more than $150,000 or married couples making more than $300,000 (currently, this rate does not apply until the taxpayer makes more than $413,201 and $464,851 respectively).

Secretary Clinton, meanwhile, would return the estate tax to 2009 parameters, meaning that the first $3.5 million would be exempt before a 45% tax rate would apply. Secretary Clinton also vows to address capital gains, but focuses on short term gains by elongating the time frame before the long term capital gains rate applies. She proposes that gains must be held for six years before qualifying for the long term rate, with a sliding scale during that period where somewhere between the short and long term rate would apply.

Surprisingly perhaps, both candidates favor retention of charitable contributions. Mr. Trump would retain the charitable contribution deduction, though top earners (couples above $309,900) would see a three percent reduction in all allowed itemized deductions. Secretary Clinton would exempt all charitable contributions from an overall 28% cap on itemized deductions and exclusions.

For appraisers, this means work on noncash charitable contributions of real property – either in whole or as part of a conservation easement – would at worst remain unchanged under either potential administration’s plans. Depending on the total effect of either candidate’s plan, though, it is possible that incentives may increase for taxpayers to donate property rather than to sell and realize gains on the asset or to pass the property as part of the estate – a possible windfall for those who regularly perform appraisals for IRS charitable contribution purposes.