The Trump Tax Effect

On the eve of the inauguration, as Donald Trump is sworn in as the 45th president of the United States, there is a lot of concern among individuals about how this new administration, and new Congress, might affect them. Putting all the politics aside, what I’m most concerned about is the possibility of major changes in tax policy going forward. How might you, as an individual, be impacted by a shift in tax brackets (the Trump Tax Effect)?

Most people think that under this new administration, everyone’s taxes will immediately be cut. But that’s not necessarily true. Under the Trump proposal, our current structure of 7 tax brackets would be reduced to just three: a 12%, a 25%, and a 33%. In other words, the brackets will be condensed and squeezed together. And when these tax brackets collapse, that means some people will see higher taxes, while others will go lower. Those in the 28% and 10% brackets will probably get hurt the most. Some will win, a few will lose, and others will see very little change at all.

According to the Tax Policy Center, about 20% of all American households would see their taxes rise under Trump’s plan. So if you’re one of those people whose taxes are going up, how do you find ways to adjust your taxable income and maybe generate more deductions? Or, if your bracket is cut, how do you maximize your tax bracket, and create more taxable income to use up that bracket? Those are the types of things that we’re thinking about right now.

Keep in mind that nothing is impacting you right now for 2016. That’s done. As for 2017, we don’t know yet, but we’re watching. We’re calculating how any changes might impact your Social Security, capital gains taxes, ordinary income tax across the board, and whether or not we need to make adjustments in our financial planning approach.

Here’s the takeaway: as a new administration takes over, it’s easy to get caught up in all of the political stuff. Let’s forget that. What we’re most focused on is how much we might be able to benefit you through smart, proactive financial advice. The political landscape is changing, no doubt. But that might create new planning opportunities for you. When was the last time you updated your financial plan? Perhaps this year is the year you update your long term strategy. Let’s make that happen. It’s simple, just send me an email  and our team will be on the way to helping you update your strategy for 2017 and beyond.

Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal.

No client or prospective client should assume that the information contained herein (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from Lucia Capital Group, its investment adviser representatives, affiliates or any other investment professional.

The information presented in this material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

Raymond J. Lucia Jr. is chairman of Lucia Capital Group, and CEO of its affiliated broker/dealer, Lucia Securities, LLC, member FINRA/SIPC, which is a subsidiary of Lucia Capital Group. Advisory services offered through Lucia Capital Group, a registered investment advisor. Securities offered through Lucia Securities, LLC, member FINRA/SIPC, and an affiliate of Lucia Capital Group. Registration with the SEC does not imply a certain level of skill or training. CAA-10825

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