Trump’s Tax Reform
On Wednesday, April 26, President Trump released his tax reform plan for 2017. As promised, he shook things up, proposing one of the biggest tax cuts in American history as well as decreasing the number of tax brackets.
Read on to review a summary of Trump’s tax plan:
Changes to Individual Taxes
- Reduce seven tax brackets to three. Trump proposed 10%, 25%, and 35%. Although we have yet to see how these would apply to certain income levels, this is a major change from what we have seen.
- Double the standard deduction to give taxpayers a greater reduction to taxable income and, therefore, lower tax bill.
- Repeal the Affordable Care Act’s (ACA) 3.8% net investment income tax imposed upon unearned income and gains of high-income taxpayers.
- Change itemized deductions to allow only mortgage interest and charitable contributions. Since the campaign, President Trump has talked about simplifying tax returns and this should significantly help.
- Repeal the estate tax and the Alternative Minimum Tax (AMT).
- Provide tax relief for families with child and dependent care expenses. The administration has not yet clarified how this relief will differ from the current expenses under Sec. 21.
Changes to Business Taxes
- Lower the business tax rate to 15%. Currently, the corporate tax rate is 35%. However, many small businesses pass their income through the individual tax code. The president has yet to identify rules to prevent individuals from creating pass-through entities to avoid being taxed at a higher individual rate. There would be rules established to prevent this practice from taking place.
- Establish a territorial tax system. However, foreign earned income would generally be excluded from this system.
- Eliminate tax breaks for special interests.
- Establish a “one-time tax” on corporate earnings realized and held overseas (on which tax is deferred).
We want to make sure taxpayers remain aware of new proposals and possible changes to the tax code. We are actively engaged on the issue of tax reform and we’ll make sure to update you on tax reform efforts!
