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Higher capital gains taxes unlikely under Trump, Republican Congress

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Former U.S. President and Republican presidential candidate Donald Trump speaks during an election night event at the West Palm Beach Convention Center on Nov. 6, 2024.

Jim Watson | Afp | Getty Images

President-elect Donald Trump‘s victory means higher individual taxes, including levies on investments, are less likely for top earners, experts say.

Vice President Kamala Harris proposed higher long-term capital gains tax rates during her campaign — raising the top rate to 28% from 20% — for those making more than $1 million annually. Long-term capital gains rates apply to assets owned for more than one year.

Harris’ plan veered from President Joe Biden‘s 2025 fiscal year budget, which called for 39.6% long-term capital gains taxes on the same top earners. 

Higher capital gains tax rates, however, are “entirely off the table,” under a Trump presidency and Republican-controlled Congress, said Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy. 

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Republicans secured control of the Senate on Tuesday and could maintain a narrow majority in the House of Representatives, which creates a “trifecta” in the White House and both chambers of Congress.

Even with partial Republican control, “it’s most likely that capital gains tax policy just stays put where it is,” York explained.

For 2024, investors pay long-term capital gains rates of 0%, 15% or 20%, depending on taxable income. Assets owned for one year or less are subject to regular income taxes.

You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income. The taxable income thresholds will increase in 2025.

Changes to ‘net investment income tax’

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Top 10 S&P 500 stock winners since Election Day

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Stock traders on the floor of the New York Stock Exchange.

Michael M. Santiago | Getty Images News | Getty Images

Many large U.S. companies have seen their stocks swell since the presidential election.

The top 10 performing stocks in the S&P 500 index saw returns of 18% or more since Election Day, according to data provided by S&P Global Market Intelligence, which analyzed returns based on closing prices from Nov. 5 to Nov. 20.

Two companies — Axon Enterprise (AXON), which provides law-enforcement technology, and Tesla (TSLA), the electric-vehicle maker led by Elon Musk, an advisor to President-elect Donald Trump — saw their stocks gain more than 35%, according to S&P Global Market Intelligence.

By contrast, the S&P 500 gained about 2% over the same period.

‘Usually a bad idea’ to buy on short-term gain

Investors should be cautious about buying individual stocks based on short-term boosts, said Jeremy Goldberg, a certified financial planner, portfolio manager and research analyst at Professional Advisory Services, Inc., which ranked No. 37 on CNBC’s annual Financial Advisor 100 list.

“It’s usually a bad idea,” Goldberg said. “Momentum is a powerful force in the market, but relying solely on short-term price moves as an investment strategy is risky.”

Investors should understand what’s driving the movement and whether the factors pushing up a stock price are sustainable, Goldberg said.

Why did these stocks outperform?

Lofty stock returns were partly driven by Trump administration policy stances expected to benefit certain companies and industries, investment experts said.

Deregulation and a softer view toward mergers and acquisitions are two “key” themes driving bullish sentiment after Trump’s win, said Jacob Manoukian, head of U.S. investment strategy at J.P. Morgan Private Bank.

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Relying solely on short-term price moves as an investment strategy is risky.

Jeremy Goldberg

portfolio manager and research analyst at Professional Advisory Services, Inc.

Rosy earnings and AI

Likewise, Axon beat analysts’ estimates in its Nov. 7 earnings results, with officials touting its “AI era plan” and raising earnings guidance, Goldberg said.

Axon and Palantir stocks were up 38% and 22%, respectively, from Nov. 5 to Nov. 20, according to S&P Global Market Intelligence.

Some companies benefited from a combination of policy and earnings, experts said.

Rows of servers fill Data Hall B at Facebook’s Fort Worth Data Center in Texas.

Paul Moseley/Fort Worth Star-Telegram/Tribune News Service via Getty Images

Take Vistra Corp. (VST), an energy provider, for example. The company’s stock jumped 27% after Election Day.

Vistra is in talks with large data centers — or “hyperscalers” — in Texas, Pennsylvania and Ohio to build or upgrade gas and nuclear plants, Stacey Doré, Vistra’s chief strategy and sustainability officer, said on the company’s Q3 earnings call Nov. 7.

Tech companies are building more and more such data centers to fuel the AI revolution — and need to source increasing amounts of energy to run them.

The ‘Elon Musk premium’

President-elect Donald Trump and Elon Musk talk ring side during the UFC 309 event at Madison Square Garden on Nov. 16, 2024 in New York.

Chris Unger | Ufc | Getty Images

But Tesla stock has additional tailwinds, experts said.

For one, Trump wants to end a $7,500 federal tax credit for EVs. Scrapping that policy is expected to hurt Tesla’s EV rivals.

Tesla has also been developing technology for driverless vehicles. In Tesla’s recent earnings call, Musk said he’d use his influence in Trump’s administration to establish a “federal approval process for autonomous vehicles.”

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Student loan legal battles delay SAVE borrowers’ path to forgiveness

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With the Biden administration’s new student loan repayment plan is tied up in legal battles, millions of borrowers have had their monthly payments put on hold.

The break from the bills is likely a relief to the many federal student loan borrowers enrolled in the Saving on a Valuable Education plan, known as SAVE. But it may also be causing them anxiety over the fact that they won’t get credit on their timeline to debt forgiveness.

For example, those also enrolled in the Public Service Loan Forgiveness program, who are entitled to loan cancellation after 10 years, have seen their journey toward that relief halted during the forbearance.

“Borrowers are frustrated about the delay toward forgiveness,” said higher education expert Mark Kantrowitz. “They feel like they’ve been waiting for Godot.”

Here’s what borrowers enrolled in SAVE should know about the delay to debt cancellation.

Delay could stretch on for months

In October, the U.S. Department of Education said that roughly 8 million federal student loan borrowers will remain in an interest-free forbearance while the courts decide the fate of the SAVE plan.

A federal court issued an injunction earlier this year preventing the Education Department from implementing parts of the SAVE plan, which the Biden administration had described as the most affordable repayment plan in history. Under SAVE’s terms, many people expected to see their monthly bills cut in half. 

The forbearance is supposed to help borrowers who were counting on those lower monthly bills. But unlike the Covid-era pause on federal student loan payments, this forbearance does not bring borrowers closer to debt forgiveness under an income-driven repayment plan or Public Service Loan Forgiveness.

Adding to borrowers’ annoyance is that “those enrolled in the SAVE Plan were not given the choice of forbearance,” said Elaine Rubin, director of corporate communications at Edvisors, which helps students navigate college costs and borrowing. If borrowers want to stay in SAVE, they can’t opt out of this pause.

Borrowers enrolled in PSLF are especially concerned, Kantrowitz said. That program requires borrowers to work in public service while they’re repaying their student loans.

“They have been working in a qualifying job, but aren’t making progress toward forgiveness,” he said. “Some borrowers are working a job they hate, but are sticking with it in the expectation of qualifying for forgiveness. Others are close to retirement and don’t want to have to work past their normal retirement age just to get the forgiveness.”

What borrowers can do

Despite the delay toward forgiveness, there are still a few good reasons for borrowers to stay enrolled in SAVE, experts say. During the forbearance, borrowers are excused from payments and interest on their debt does not accrue.

Keep in mind: Even if you make payments under SAVE during the forbearance, your loan servicer will just apply that money toward future payments owed once the pause ends, the Education Department says.

If you’re eager to be back on your way to debt cancellation, you have options.

You may be able switch into another income-driven repayment plan that is still available. Under that new plan, you may have to start making payments again. Yet if you earn under around $20,000 as a single person, your monthly payment could still be $0, and therefore you might not lose anything by switching, Kantrowitz said.

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Changing plans might be especially appealing to those who are very close to crossing the finish line to debt forgiveness and just want to see their balance wiped away, experts said. (You’ll likely be placed in a processing forbearance for a period while your loan servicer makes that switch. During that time, you will get credit toward forgiveness.)

The Education Department is also offering those who’ve been working in public service for 10 years the chance to “buy back” certain months in their payment history. This allows borrowers to make payments to cover previous months for which they didn’t get credit. But to be eligible for the option, the purchased months need to bring you to the 120 payments required for loan forgiveness.

“The buyback option might be eliminated under the Trump administration,” Kantrowitz said. “So, if you want to use it, you should use it now.”

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The must-have gift of the season may be a ‘dupe’

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‘Tis the season for giving… dupes?

Buying a dupe — short for duplicates — rose to the top of this year’s holiday wish-lists. A dupe gift is a gift that is a cheaper alternative to a more expensive, branded item. They were largely kept under the radar until recently because a “fake” was dubbed inferior to the real thing, but a lot has changed.

In some cases these brand imitators are now even preferred to their pricier counterparts.

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This year, 79% of consumers said they would buy a dupe as a gift for their loved ones for the holidays, according to a survey of more than 1,000 shoppers by CouponCabin.

More than half — 51% — of those that the coupon site polled said dupes are better than the original.

Even when consumers can get the real thing, nearly 33% of adults intentionally purchased a dupe of a premium product at some point, a separate report by Morning Consult also found. The business intelligence company polled more than 2,000 adults in early October.

When is a dupe an appropriate gift? 

Before you buy a dupe, think about who you’re shopping for, experts say. 

For instance, some family members or friends might especially appreciate a dupe for what it is, said Ellyn Briggs, a brands analyst at Morning Consult. 

“It’s kind of a badge of honor for young people to get a dupe,” she said.

On the other hand, you risk disappointing someone if they have been asking for a specific product for a while, said Melanie Lowe, CouponCabin’s savings expert

If that is the case, consider the cost of the name-brand item and assess if it is within budget. The key is to know when to splurge or save, Lowe said.

“If you’re talking about a product that you’ll use daily… invest in the original,” Lowe said. “That purchase is usually worth it.”

Alternatively, “if it seems appropriate in the situation — if it is a more light-hearted gift — you can definitely go the dupe route,” she said. 

‘It’s a dupe for a reason’

While some shoppers take pride in buying dupes, roughly 86% of shoppers have been disappointed by their purchase of a dupe, CouponCabin found. 

“It’s a dupe for a reason,” said Lauren Beitelspacher, professor of marketing at Babson College. “We don’t know where it’s made, who is making it or the quality.”

Visa's View on the Holiday Shopping Season

Shopping secondhand this season

Consumers should make the same value considerations when buying secondhand, which has also become more popular, even for gifting.

Three in four shoppers said that giving secondhand gifts has become more accepted over the past year — notching a 7% increase from the year before, according to the 2024 OfferUp recommerce report. OfferUp, an online marketplace for buying and selling new and used items, polled 1,500 adults in July.

The majority, or 83%, of shoppers are also open to receiving secondhand gifts this holiday season, the report found.

Shoppers have increasingly turned to resale for a number of reasons, including value, sustainability and as a means to secure hard-to-find luxury items. Because secondhand shopping is considered eco-friendly, it’s also become more socially acceptable. OfferUp’s report credited Generation Z for driving a shift in mindset.

“The stigma around secondhand gifting is rapidly diminishing,” said Todd Dunlap, OfferUp’s CEO. 

However, the same buyer-beware mentality applies, cautioned Babson’s Beitelspacher, especially if you are ordering secondhand goods online. “You might not get what you want,” she said.

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