How will incoming President Donald Trump’s tax plan affect individual and corporate taxpayers alike? Trump has promised on several occasions that his new tax scheme will help most individual, business and corporate taxpayers save taxes. Some of the plan’s provisions will lower the business tax rate from 35 percent to 15 percent. He says that he will reduce the seven individual tax brackets that are currently used to only three. His plan adapts the current rates for qualified capital gains and dividends to these three new brackets. Also of significance is that the new tax plan will eliminate the net investment income tax and the individual and corporate alternative minimum taxes.
Trump’s plan eliminates the head of household filing status while capping itemized deductions at $100,000 for single filers and $200,000 for married couples filing jointly. It increases the standard deduction from $6,300 to $15,000 for singles and from $12,600 to $30,000 for married couples filing jointly while eliminating the personal exemption.
It introduces other childcare-related tax provisions and makes childcare costs deductible from adjusted gross income up to the average cost of care in a taxpayer’s state. These deductions would be phased out for individuals earning more than $250,000 or couples earning more than $500,000.
Trump’s plan does offer “spending rebates” to lower-income families through the earned income tax credit. A taxpayer may take these credits in any amount up to $1,200 a year for childcare expenses. The plan creates new saving accounts for care for children or elderly parents, or school tuitions while matching 50 percent of contributions.
The seven tax rates that are currently used will be replaced by three tax rates: 12 percent, 25 percent, and 33 percent. The plan adapts the current rates for qualified capital gains ((0, 15, 20) and dividends to the new brackets.
What will Trump’s plan do for business taxpayers? Trump plans to reduce the corporate income tax rate from 35 percent to 15 percent. He wants to allows firms engaged in manufacturing in the U.S. to choose between the full expensing of capital investment and the deductibility of interest paid. He also wants to eliminate the § 199 domestic production activities deduction and all other business credits, except for the research and development credit.
Trump wants Congress to enact a deemed repatriation of currently deferred foreign profits, at a tax rate of 10 percent. The plan will also increase the cap on the tax credit for employer-provided day care from $150,000 to $500,000 and reduces its recapture period from 10 years to 5.
It is wise to consult with an experienced and knowledgeable tax professional to help any taxpayer in the New York or Tri-State area, whether an individual or business, assess their current tax situation looking ahead to the Trump Administration’s new tax policies. If you have any question about taxes, especially in planning ahead for 2017, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
