How to Prepare Your Finances for Possible Policy Changes After 2028

The 2026 midterm elections have renewed discussion about how federal financial policy could evolve after the next presidential election. Democrats' capture of both chambers of Congress in the Nov. 3 midterm elections is unlikely to change federal tax law over the next two years. It may, however, reset the planning calendar for affluent households, as attention shifts to a 2028 election that could decide whether the tax cuts enacted in 2025 survive.

The party will control the House and Senate when the 120th Congress convenes on Jan. 3, 2027, ending Republicans' unified control of Washington. President Trump has said he would veto Democratic legislation he opposes, and neither party holds the two-thirds majorities needed to override him. Accounting firms including Plante Moran and PwC expect current tax law to remain largely intact through 2028.

Democratic tax proposals target higher-income households

Sen. Ron Wyden of Oregon, expected to resume the chairmanship of the Senate Finance Committee, said after the election that the panel would "redouble its efforts to ensure billionaires pay their fair share." Rep. Richard Neal of Massachusetts is expected to return as chairman of the House Ways and Means Committee.

Bills introduced by Democratic lawmakers, including several potential 2028 presidential candidates, would raise top marginal rates and add surtaxes on high earners that extend to investment income. Other proposals would tax capital gains as ordinary income above certain thresholds, eliminate the step-up in basis at death, lower the estate tax exemption and tax unrealized gains annually for the wealthiest households.

Exceptionally large retirement accounts could also receive attention. Sen. Ron Wyden and Rep. Richard Neal have proposed preventing further contributions to traditional and Roth accounts when a person’s combined IRA and defined-contribution balances exceed $10 million. Their legislation would also require distributions from certain large accounts.

Social Security will require bipartisan attention

Social Security’s financing challenge exists independently of which party wins in 2028.

The program’s trustees project that the fund paying retirement and survivor benefits will exhaust its reserves in the fourth quarter of 2032. If Congress takes no action, continuing revenue would initially cover approximately 78% of scheduled benefits. Social Security would not disappear, but the program could not pay every scheduled benefit under current law. Social Security Administration

Democratic proposals have generally placed greater emphasis on raising revenue, including collecting payroll taxes on more high-income earnings. Other possible approaches include adjusting the retirement age, changing benefit formulas or combining additional revenue with targeted benefit changes.

A durable solution will likely require negotiation between the parties. The longer Congress waits, the less time lawmakers will have to phase in changes gradually and distribute their effects across generations.

Healthcare policy may have the widest reach

Healthcare is likely to remain a major policy focus because insurance premiums, deductibles and uncovered expenses affect families across the income spectrum.

The incoming Democratic Congress has identified Medicaid and Affordable Care Act assistance as early priorities, although major legislation would still require presidential approval or enough support to overcome a veto.

Expanded assistance could reduce insurance costs for qualifying households. Other policy changes could affect eligibility, premiums or government spending. These questions are particularly important for self-employed workers and people hoping to retire before becoming eligible for Medicare.

Planning considerations before 2029

Several strategies that may warrant review while current law remains in place.

• Roth conversions. Converting assets in a traditional individual retirement account (IRA) to a Roth IRA triggers income tax at current rates in exchange for potentially tax-free withdrawals later. Conversions can also reduce future required minimum distributions (RMDs). Because they raise MAGI, however, conversions can shrink or eliminate the senior deduction and increase Medicare premiums through the income-related monthly adjustment amount (IRMAA), making annual sizing a central consideration.
• Capital gains timing. Investors may consider realizing some gains at current rates, particularly in lower-income years. That decision is weighed against the value of the step-up in basis, which itself could be curtailed.
• Estate planning. Few households owe federal estate tax under a $15 million exemption. If a future Congress lowers it, gifts and trusts funded while the higher exemption is available could prove valuable. Pennsylvania's inheritance tax applies independently of federal law.
• Charitable giving. Taxpayers 70½ and older can make qualified charitable distributions (QCDs) directly from IRAs, meeting giving goals without adding the amount to taxable income.

We generally caution against making investment decisions based on election results. Markets have advanced under varying combinations of party control.

Outlook

The midterm results are unlikely to alter tax bills in 2027 or 2028. They have, however, raised the stakes of the next presidential election and drawn attention to how much of the current tax code, and other federal programs and policies, could be changed, after it.