Financial expert talks Clinton, Trump tax proposals

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ST. LOUIS, MO (KTVI)-Donald Trump and Hillary Clinton have very different tax proposals, both of which could have an affect on your retirement planning. Matt Allgeyer, Financial Planner at Wamhoff Financial Planning & Accounting Services, outlines the highlights of both plans, and explains what investors need to be aware of.

Trump`s Plan:

• Reduce the top marginal tax rates from 39.6%, a move that will benefit the country`s highest income earners.
• Consolidate the federal income tax brackets from six to three: 12%, 25% and 33%
• Eliminate the alternative minimum, estate, gift and investment income tax.
• Reduce business tax rates to no more than 15%
• Set a maximum capital gains tax rate of 20%
• Set a maximum tax rate of 10% for those earning $100,000 or less

How it may affect retirement planning and investing:

• If the estate tax is eliminated, some families will experience great savings, and most families will not need estate tax planning.
• Planning for pass through income could get more complicated

Clinton`s Plan:

• Raise taxes and limit deductions for high-net-worth clients
• Place a cap on itemized deductions at 28% of income
• Impose a 4% ‘fair share’ surtax on income above $5 million, which would raise the top rate to 43.6%
• Raise the top rate on dividends on capital gains to 28% (from 20%)
• Raise the current earnings cap of $118,500 for contributions to Social Security and Medicare
• Close loopholes on existing estate tax law to eliminate sheltering funds and restore the 45% rate on estates with a $3.5 million exemption
• Limit gifting to $1 million lifetime exemption

How it may affect retirement planning and investing:

• More funds will be coming into the Social Security and Medicare system due to the increased earnings cap
• Consider paying down (or paying off) mortgages or other loans for which you receive a deduction
• The higher rate on dividend and capital gains may impact the bond and stock markets
• Estate tax law revision could affect large landowners, such as farmers

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