With weighty issues such as national security and gun control dominating much of the verbal volleyball in the battle for the White House, it’s no wonder the money matters on Americans’ minds are getting sidelined.
But financial advisors recommend paying attention to the positions and proposals from the presidential front-runners that could affect your wallet for better or worse.
“At the end of the day, whoever ends up in office will be making decisions about what’s coming out of your pocket,” said Tom O’Connell, president of International Financial Advisory Group.
Topping the list of personal finance issues worth looking at are taxes — and more taxes — and the proposals put forth affecting everything from your paycheck to your investments.
Brackets (not the fun March Madness kind)
Current tax code puts individual taxpayers into one of seven brackets, wherein tax rates range from 10 percent to 39.6 percent.
On the Republican side, presumptive nominee Donald Trump wants just four brackets, with marginal rates of 0 percent, 10 percent, 20 percent and 25 percent. The top rate would apply to annual income above $150,000 for single filers and $300,000 for joint filers.
Presumptive Democratic nominee Hillary Clinton would add a 4 percent surtax to adjusted gross incomes above $5 million. She also supports the so-called Buffett Rule, which calls for taxpayers with adjusted gross incomes above $1 million to pay at least 30 percent of that to Uncle Sam.
For most people, the devil’s in the details.
“What really gets my clients in the gut is a concern about future deductions,” said Craig Ferrantino, president of Craig James Financial.
“There are a lot of steps between what a candidate says and what can actually get legislated in Congress and then become law. That’s a long process.”
Indeed, both candidates have proposed making changes to permitted write-offs for taxpayers who itemize their deductions rather than take the standard deduction.
Clinton wants to cap all deductions at 28 percent of income, and Trump says he’d phase out all deductions except for those for charitable donations and mortgage interest.
While those are two of the most common deductions taken, roughly 28 million small-business owners reduce their business costs by using multiple deductions at tax time that most people are unaware exist.
“Some small-business owners rely on those deductions to afford to run their businesses,” Ferrantino said.
Trump has said, however, that he would boost standard deductions to $25,000 for single filers and $50,000 for married couples. (Many small-business owners include their business income and expenses on their individual tax forms.)
The hated AMT
The alternative minimum tax has been a thorn in the side of many taxpayers every year.
Originally intended to prevent the ultra-wealthy from avoiding paying taxes, the so-called AMT now primarily affects well-off households, but not those with the highest income, according to nonpartisan Tax Policy Center. It also tends to affect large families, married couples and those in high-tax states.
Trump wants to eliminate the AMT; Clinton has offered no specific changes but has said in the past that it needs reform.
Investment income vulnerable
Clinton’s tax proposal takes aim at gains on investment income. Short-term capital gains are currently defined as realized gains on investments held less than one year and are taxed as ordinary income. Gains on investments held longer than that are taxed at a 20 percent rate.
For starters, Clinton would apply ordinary income-tax rates to investments held for under two years instead of one. Also, the 20 percent rate would apply only to gains on investments held for at least six years.
Gains on investments held between two and six years would be subject to a tax rate ranging from between 24 percent and 39.6 percent.
She also would preserve the 3.8 percent Medicare surtax — technically called the net investment income tax — that applies to investment income of taxpayers whose income is above certain thresholds, depending on how you file.
Trump would eliminate that surtax.
Bull’s-eye on retirement money
Nothing has come out of the Trump camp specifically about tax-advantaged retirement savings accounts, such as 401(k) plans and individual retirement accounts, but Clinton wants to impose contribution limits on accounts with high balances.
Her proposal would prohibit account holders from making more contributions to any retirement account once the aggregate value of all their accounts reach a certain level. The limit would mirror the maximum lawful limit for an annuity in defined benefit plans like pensions, which the Tax Policy Center said would have been about $3.4 million for a 62-year-old in 2015.
O’Connell of International Financial Advisory Group said that this could be a concern for some people, depending on where they live and exactly what the limit would be under Clinton’s plan.
“If you withdraw [from retirement savings] at a rate of 4 percent in a low-interest-rate environment where some investors aren’t even earning that much, the money can be depleted fairly quickly,” O’Connell said.
Death and taxes
Right now, with a $5.45 million per-person exemption, the estate tax — sometimes called the “death tax” by its opponents — hits just 0.2 percent of estates.
Clinton’s plan to reduce the exemption to $3.5 million and increase the top tax rate from 40 percent to 45 percent would affect an estimated 0.4 percent of estates. But her plan includes no indexing for inflation, which could result in larger numbers of estates being affected by it over time.
But in a departure from President Obama’s estate-tax stance, she has not proposed repealing the step-up in basis, which allows assets to pass to heirs without taxes being paid on the appreciation in the assets’ value.
Meanwhile, Trump wants to eliminate the tax altogether. But, of course, all of these proposals might never see the light of day in Congress.
“There are a lot of steps between what a candidate says and what can actually get legislated in Congress and then become law,” said Ferrantino of Craig James Financial. “That’s a long process.
“So we’d still be many steps away, no matter who is elected,” he said.
— By Sarah O’Brien, special to CNBC.com