Harris wants a 28% capital gains tax rate on top earners; here's what advisors are telling clients.

Kamala Harris, US Vice President and Democratic presidential candidate in 2024 arrives at Portsmouth International Airport in Portsmouth, New Hampshire, on September 4, 2024. Joseph Prezioso | Getty Images’We don’t make changes until it becomes law’Currently, investors paying long-term capital gains pay between 0%, 15% or 20% with an extra 3.8% net investment income tax assessed once their modified adjusted gross income exceeds either $200,000 for single filers or $250,000 when filing jointly. Harris’ plan would also increase the NIIT to 5%, according to reports in The Wall Street Journal on Wednesday. Profitable assets owned for one year or less are subject to regular income tax rates which will rise without action from Congress after 2025 if nothing changes; both Biden and Harris’ tax proposals require congressional approval before implementation. But with future control of both houses of Congress uncertain, many financial advisors are carefully monitoring plans before taking any concrete actions. Louis Barajas, Chief Executive of International Private Wealth Advisors of Irvine in California stated, “No changes will be implemented until legislation passes.” “These proposals often provoke knee-jerk responses,” stated Barajas, a member of CNBC’s Financial Advisor Council. While former President Donald Trump has voiced strong support for tax cuts overall but did not detail a capital gains tax proposal, Project 2025 addressed it by conservative think tank The Heritage Foundation with more than 100 other right-leaning organizations; its proposals called for capital gains tax rates of 15% for higher earners in its vision for conservative administration plan. Project 2025 would also abolish the National Insurance and Income Tax Trust, though Trump himself has disassociated himself with it. Who May Pay Higher Capital Gain TaxesBiden has proposed raising capital gains taxes to any taxable income exceeding $1 Million per year (or $500,000 for married couples filing separately), according to Treasury data. These amounts would be adjusted annually for inflation; however, experts note that an increased capital gains tax could impact lower-earners with one-time sales of businesses or commercial properties, according to some. Barajas noted that more tax planning will likely take place for people in their 60s and 70s with rental properties that they intend to sell, though Barajas cautioned that timing a sale could affect its ultimate success. Biden’s higher capital gains tax would only apply to capital earnings that exceed $1 million, for instance if someone with $1.1 million of total taxable income and $200k worth of capital gains would owe this additional rate on $100,000 according to Treasury. “Those with over $1 Million could likely come by way of various sources – stock sales, required minimum distributions or otherwise,” according to Chichester Financial Group in Phoenix founded and led by CFP John Chichester Jr. He is also a certified public accountant. But there are ways to reduce annual income and circumvent higher tax rates, including using capital losses carried over from prior years, according to him. As of Sept 5th the S&P 500 had seen year-to-date gains of 16% or greater while individual assets may provide opportunities for tax loss harvesting opportunities.