4 Money Moves To Make Immediately After the Election If Harris Wins
With the presidential election less than 100 days away, you may be looking at each candidate and how their proposed policies could impact you. There are so many factors to consider, but one may be the financial implications each candidate might have.
Here are some money moves you may want to make in the event of a Harris victory.
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Maximize Tax-Advantaged Account Contributions
If elected president, Harris may propose tax changes. These changes could involve adjusting the tax brackets, which were lowered as part of Trump’s Tax Cuts and Jobs Act. Changes could also include increasing tax rates for the highest earners.
If you’re a higher earner, you may want to consider taking advantage of current tax brackets by contributing more to tax-advantaged accounts now while you’re still eligible.
One account to consider is a Roth conversion, often called a backdoor Roth IRA. With a backdoor Roth IRA, you can convert nondeductible contributions from a traditional IRA into a Roth IRA. This is typically done by someone whose income is too high for a Roth IRA.
With a Roth IRA, your money can grow tax-free, and you can withdraw the converted amount tax-free in retirement. Also, unlike traditional IRAs, you don’t have to take the required minimum distributions from the accounts. However, you will pay taxes on the converted investment by taking advantage of a backdoor Roth IRA. It would make sense to go through this process now while tax rates are lower.
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Minimize Your Estate Tax Burden
Another change that Harris might make if she is elected president is to lower the estate tax exemption or increase the estate tax rate. An estate tax is a tax on the transfer of your taxable estate amount, which includes assets such as cash, securities and other property. While some states have their own estate taxes, the federal estate tax exemption limit is $13.61 million for the tax year 2024. You will only need to pay estate tax if the value of your taxable estate exceeds this limit. Also, assets inherited by your spouse, if a U.S. citizen, are not subject to estate tax.
If Harris lowers this estate tax exemption rate, many who are not ultra-wealthy might find themselves triggering the estate tax threshold. If you are worried about this happening to you, there are a few options that you could explore to minimize your estate tax burden.
You could gift assets during your lifetime (instead of after your death) to reduce the overall value of your taxable estate. Be aware that there is an annual exclusion amount for gifts you are allowed to give before triggering gift taxes, and this amount could also be reduced under a Harris presidency. In 2024, the exclusion is $18,000 per recipient, gifter and year. There is no limit to the number of different gift recipients. You can also pay medical bills or tuition without being subject to taxes if the payments are made directly to the school or medical facility.
You could establish an irrevocable trust if you are not ready to give the money away yet. An irrevocable trust is one that the creator can’t change or revoke after the assets are in the trust. Irrevocable trusts can minimize future estate taxes and help avoid the probate process upon death. However, once irrevocable trusts are executed, making changes to the trust is very difficult, so be certain about this strategy before you go this route.
“As a tax and trust and estates attorney, I anticipate assisting high-net-worth individuals with tax-planning strategies if Harris wins the election and Democrats take control of the Senate,” said David Brillant, tax and trust and estate lawyer, and founder of Brillant Law. “Specifically, I would advise clients to consider accelerating lifetime gifting and grantor-retained annuity trusts before potential tax law changes.”
Brillant added, “I would also prepare to help clients steer new trust laws, especially relating to grantor trusts. The Harris tax plan calls for eliminating certain grantor trust benefits, which could significantly impact existing estate plans. Reviewing and potentially restructuring trusts ahead of changes may mitigate tax issues down the road.”
Invest In Green Energy
Harris has historically supported expanding green energy and has proposed policies that support renewable or energy-efficient alternatives. Tax incentives for having energy-efficient or renewable energy items installed in your home may increase with a Harris presidency. To prepare for this, you could start researching energy-efficient or renewable energy items you may want to install in your home to take advantage of future tax incentives.
This could also be a great time to consider investing in green energy companies. Because of Harris’s policies, many of these companies with strong financials could see a significant boost.
Lock In Investment Gains
You trigger a capital gains tax when you sell assets like stocks, bonds or real estate at a profit. Most taxpayers pay a 15% capital gains tax, but those in the top income bracket pay 20%. However, there is a strong likelihood these rates could increase under a Harris presidency. You’ll want to talk to your financial advisor to determine if it would make sense to lock in any profits now under current tax rates.
The Bottom Line
It’s too early to know who will win the presidential election, so don’t make any drastic money moves just yet. However, understanding potential changes under a Harris presidency can help you make smart money moves if the time comes.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out I’m an Investor: I’m Making These Money Moves Immediately If Trump Wins.
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This article originally appeared on GOBankingRates.com: 4 Money Moves To Make Immediately After the Election If Harris Wins
