I am going to try to comment on this is the least political way possible, but realistically, future taxes will be impacted by who is elected.
Looking into the future, the biggest financial items for us are:
1. Declining interest income due to falling interest rates;
2. Will the 2017 income tax provisions be extended after they expire in 2025?
3. Will ACA subsidies continue at current income levels after 2025?
I am not really worried about capital gains rates because our annual taxable income is nowhere near the $400,000 threshold and neither candidate is talking about tax increases for folks at this income level.
More significantly, these last few years, we were able to earn significant interest income on savings for the first time in over 15 years. Perhaps I should have tied up cash savings in ten year Treasuries, but I didn’t. Short term yields look like they are about to drop sharply. I am not putting these savings at risk, so there is going to be some lost income due to falling rates. That’s just a fact of life.
Next, the income tax provisions from the 2017 “tax cut” will impact us if they expire. That tax cut significantly increased the standard deduction, while also reducing some of the income tax brackets and eliminating personal exemptions. I have not attempted to figure out how much impact it will have if the tax cuts are not renewed. Neither candidate has talked about increasing taxes for those under $400,000, but Congress must take action to stop those tax cuts from expiring and I am not sure that can be assumed.
The old ACA subsidy income limits were 400% of the federal poverty level and the subsidies fell off the cliff at the first dollar of income over that limit. For a family of two, the limit prior to 2021 had been in the vicinity of $68k of modified adjusted gross income. The law was changed during the pandemic to raise the subsidy income limits to at least the $130’s of MAGI, I’m not sure exactly what the highest limit is but the subsidies phase out instead of dropping off a cliff. Anyway, we can’t get below $68k if those subsidies return to the old levels after 2025. I will go on Medicare late in 2025, but my wife not until 2030. The ACA plans with no subsidies are very expensive.
Everyone’s income and tax situation is different, but we are pretty typical early retirees and so others may be looking at similar situations. There may be other items as well I am forgetting about. Good luck to everyone.
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