What specific tax plan will Donald Trump implement as President of the United States? Trump’s initial plan released in September 2015, set forth four tax brackets of 0%, 10%, 20% and 25%. In October, just prior to the election, he released a new plan that adopted the House Republicans’ approach using three tax brackets, 12%, 25% and 33%. Either plan seems to adopt aspects of the tax reform pursued by House Republicans, as the president-elect moves closer to the Republicans’ tax agenda. Here’s a look at Trump’s tax plan then and now.
THEN: The plan proposed collapsing the current seven tax brackets, which range from 10 to 39.6 percent, into three brackets of 10, 20, and 25 percent.
NOW: The current plan would reduce the number of individual income tax brackets from the current seven to three: 12, 25, and 33 percent cutting the top 39.6 percent rate by 6.6 percentage points.
THEN: The plan proposed increasing the standard deduction to $ 25,000 for single filers and $50,000 for joint filers in 2015, indexed for inflation thereafter.
NOW: The current plan would make the standard deduction $15,000 for single filers and $30,000 for married couples filing jointly.
THEN: The plan proposed taxing dividends and capital gains at a maximum rate of 20 percent. The plan proposed a corporate tax rate of 15 percent and limiting the top individual income tax rate on pass-through businesses such as partnerships to no more than 15 percent. Distributions from “large” pass-through businesses received by owners who elected the 15 percent flat rate would be taxed as dividends.
NOW: The current plan would tax capital gains and dividends under the current preferential rate structure. The current plan would cut the top corporate tax rate from 35 percent to 15 percent. Owners of pass-through entities (sole proprietorships, partnerships, and S corporations) could elect to be taxed at a flat rate of 15 percent on their pass-through income rather than under regular individual income tax rates. The special rate structure for capital gains and dividends would be retained, but the 3.8 percent net investment income tax rate that currently applies to capital gains and dividends would be repealed.
THEN: Trump’s prior plan proposed limiting the tax value of itemized deductions (other than charitable contributions and mortgage interest) and exclusions for employer-provided health insurance and tax-exempt interest.
NOW: The current plan would cap the total amount of itemized deductions at $100,000 for single filers and $200,000 for joint filers.
Of course, this all subject to change.
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 an uncertain tax future. 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.
