Election 2024: Plan, and Prepare for All Outcomes

September 24, 2024

As voters prepare for the United States elections on November 5, there has been significant political upheaval and several dramatic changes in the contours of the presidential race.

Most notably, voters have contended with the passing of the torch from President Biden to Vice President Harris at the top of the Democratic ticket, considerably impacting the dynamics of both the election and potential policy.

While the presidential and Congressional races are too close to confidently predict, and are likely to remain so, it is important to understand the implications of a range of outcomes on your goals. In Election 2024: Plan, and Prepare for All Outcomes, we discuss the most significant impacts for wealth planning across potential election outcomes and actionable steps you can take today to prepare.

Divided Government

A presidential victory by one party and at least one branch of Congress controlled by the other would make it likely that key provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) would sunset in 2025. Barring action from Congress, the top ordinary income tax rate would revert to 39.6%; the 20% qualified business income passthrough deduction would expire; and the estate, gift and generation-skipping transfer (GST) tax exemptions would be halved to approximately $7 million.

Under these circumstances, taxpayers should consider whether items of income and deduction can be shifted from one tax year to another. Read the advice

Unified Democratic Government

Given a unified Democratic government, the TCJA provisions for taxpayers in the highest income bracket and record-high estate and gift exemption amounts would likely be permitted to sunset. Additional proposals include raising capital gains tax rates on taxpayers with more than $1 million in income to 28% — which is lower than the 39.6% proposed initially by the Biden administration — and imposing an additional tax on unrealized gains of taxpayers with more than $100 million in assets who pay less than the maximum rate of tax on their income.

In this scenario, in addition to planning for the sunset of the TCJA at the end of 2025, there will be pressure to implement gifts to GST trusts, sales to grantor trusts, GRATs and Roth IRA conversions before any change in the law, potentially before the end of 2024. Read the advice

Unified Republican Government

Under a unified government, Republican priorities would likely center around a reduction in the capital gains tax rate, a reduction of the corporate income tax rate and making the TCJA provisions that would otherwise sunset permanent. The state and local tax deduction (SALT) cap would also likely remain in place, as would eliminations of miscellaneous itemized deductions and the elimination of the personal exemption.

In this scenario, taxpayers should consider deferring corporate income until 2025 or 2026 and accelerating corporate deductions and claims for green energy credits. Read the advice

Start Now

In Election 2024: Plan, and Prepare for All Outcomes, we discuss actionable steps you can take to optimize your plan both now and following the election. Modeling the universe of strategies for an array of potential tax environments takes considerable time, coordination and decision-making. Consequently, we encourage you to schedule a meeting with your Northern Trust advisor now to discuss your plan, including how Northern Trust’s Goals Driven process can help you model how tax changes and various strategies will impact your goals, liquidity and complete tax picture.