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Presidential Candidate Hillary Clinton’s Revised Tax Plan

Posted on: October 14th, 2016
hillary clinton tax proposalOur tax attorneys compared the Presidential candidates’ estate tax proposals in an earlier post. Recently, Democratic Presidential nominee Hillary Clinton significantly modified her estate tax proposal.

Clinton’s campaign announced a revised proposal including a 65 percent maximum tax rate on estates, which is 20 percent higher than the provisions of her original proposal. The top tax rate would apply to estates valued at over $500 million per individual (or $1 billion per couple); smaller estates ($10 million to $50 million per individual) may face a 50 to 55 percent tax rate on assets over a proposed exemption of $3.5 million per individual.

The revised rate would produce a serious tax burden on family businesses, small businesses, and wealthy taxpayers. Those affected face wealth transfers subject to significant tax requirements if adequate planning is not in place. The estate tax exclusion for the 2016 tax year is $5,450,000 and is predicted to rise to $5,490,000 in 2017. According to The Wall Street Journal, the tax rate has not been as high as 65 percent since 1981.

Clinton’s proposal would also eliminate the step-up in basis. Our tax attorneys review more about basis planning here. The income tax value of most assets (excluding certain annuities and assets held in qualified plans) generally receives a ‘step-up’ in basis from the acquisition value upon the decedent’s date-of-death. This helps to reduce or eliminate the capital gains tax due upon sale of appreciated assets by recipients. Clinton’s proposed terms would remove this step-up, resulting in increased income tax liability for many heirs if they sell the assets. The tax would be calculated based on the difference between the inherited basis (typically equal to the decedent’s basis in the property) and the sale price, which in some cases might reflect a depreciation. 

As the election season draws to a close, stay current with the candidates’ tax positions. Subscribe to our tax law blog for alerts sent directly to your inbox.
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