Financial advisors advise against knee-jerk reactions to candidates' proposed tax increases.

• As the election approaches, investors may experience stress due to the numerous tax policy proposals. This can lead to impulsive financial decisions, according to experts.
• Congressional approval and future control of the House and Senate are uncertain due to changes in tax law.
• CFP Louis Barajas, CEO of International Private Wealth Advisors, stated that no changes would be made until the law has passed.

As the election approaches, investors may experience stress due to the numerous tax policy proposals. This can lead to impulsive financial decisions, according to experts.

Vice President Kamala Harris intends to reduce taxes for the middle class while increasing taxes on the wealthiest Americans and corporations as the Democratic presidential nominee.

During his first term, former President Donald Trump, the Republican nominee, enacted tax breaks and aims to extend them. Additionally, he supports taxes on Social Security benefits and higher tariffs, or taxes on imported goods from another country.

Louis Barajas, CEO of International Private Wealth Advisors in Irvine, California, stated that there are sometimes knee-jerk reactions to certain proposals.

The Social Security cost-of-living increase for 2025 is projected to be 2.5%. The inflation breakdown for August 2024 is presented in a single chart. Harris has proposed a 28% capital gains tax rate. This rate compares to recent history.

While a candidate's tax proposal may differ from signed legislation, Congressional approval is necessary for tax law changes, and the future control of the House and Senate is uncertain.

Rick Kahler, president of Kahler Financial Group in Rapid City, South Dakota, stated that "various items are included in presidential budgets but are not ultimately enacted."

Trump's expiring tax cuts

The tax breaks enacted by Trump in 2017 are a significant challenge for candidates' proposals.

Several individual provisions, including lower federal income tax brackets, bigger standard deductions, a more generous child tax credit, and higher gift and estate tax exemptions, will expire after 2025 without action from Congress.

It is challenging to predict whether the provision for certain issues, such as estate and gift tax exemptions, will be extended, requiring families and advisors to undertake multi-year planning, experts say.

Barajas, a member of CNBC's Financial Advisor Council, stated that no changes will be made until the proposed tax law has been passed. Any actions taken based on the proposed legislation could result in unintended consequences if the bill is not enacted or if its details are altered during debates among lawmakers.

He emphasized the importance of aligning tax decisions with long-term financial plans.

Fear often comes from a 'scarcity mindset'

Our emotions drive the vast majority of financial decisions, according to Kahler.

A scarcity mindset often causes investors to believe that tax increases will significantly reduce their resources, according to him.

Kahler advised that regardless of one's financial situation, it is crucial not to make decisions based on strong emotions.

"This is a good time to take a deep breath if you're feeling scared to death," he said. "Emotions can cloud your judgment and make it difficult to make a clear decision."