The election of Donald Trump may bring changes to tax laws for both individuals and businesses as tax reduction was a centerpiece of Trump’s campaign. Some of the most significant possible changes under Trump’s proposals are listed below.
- Tax Brackets: Three tax brackets (12%, 25% and 33%) instead of the current seven tax brackets, which tops out at 39.6%.
- Standard vs. Itemized Deduction: Standard deduction increase to $15,000 for single and $30,000 for married filing jointly. In addition, itemized deductions would be capped at $100,000 and $200,000 for single and married filing jointly, respectively.
- Capital Gains/Dividends: There were no apparent changes to capital gains or dividends under Trump’s plan. The rates would presumably be realigned based on the other tax rate changes.
- Estate and Gift Tax: Repeal the federal estate and gift tax, which is set at $5.49 million for single and $10.98 million for married taxpayers for 2017.
- Alternative Minimum Tax (AMT): Eliminate the alternative minimum tax.
- Affordable Care Act: Repeal the Affordable Care Act, which would repeal the 3.8% net investment income tax.
- Corporate Income Tax: To lower the business tax rate from 35% to 15% and eliminate the corporate AMT.
- Small Businesses: Owners of pass-through entities could elect to be taxed at a flat rate of 15% rather than under the regular individual income tax rates.
- Section 179 Expensing: Increase the annual cap from $500,000 to $1 million.
- Manufacturing Expensing: In lieu of deducting interest expenses, manufacturing firms would be able to immediately deduct new capital investments in the business.
If any or all of these changes are quickly passed in January, it is uncertain whether the changes will be made retroactive to January 1, 2017. You may wish to consider these potential tax law changes for your 2017 tax planning but, at this point, remember that they are merely President-Elect Trump’s proposals and not law.
We very much appreciate the opportunity to serve you. Please contact Wouch, Maloney & Co., LLP with any questions regarding the possible changes, or for assistance with any tax or other financial issues.