Now that Donald Trump has been elected President of the United States, we thought it would be helpful in connection with your 2016 year-end and future tax planning to summarize the key proposals in his tax plan proposals made during the campaign.
Changes to Individual Income Taxes:
- Consolidates the current seven tax brackets into three, with rates on ordinary income of 12 percent, 25 percent, and 33 percent.
- Adapts the current rates for qualified capital gains and dividends to the new brackets.
- Eliminates the head of household filing status.
|Individual Income Tax Brackets Under the Trump Plan:|
|Ordinary Income Rate||Capital Gains Rate||Single Filers||Married Joint Filers|
|12%||0%||$0 to $37,500||$0 to $75,000|
|25%||15%||$37,500 to $112,500||$75,000 to $225,000|
- Eliminates the Net Investment Income Surtax.
- Increases the standard deduction from $6,300 to $15,000 for single taxpayers and from $12,600 to $30,000 for married couples filing jointly.
- Eliminates the personal exemption and introduces other childcare-related tax provisions.
- Makes childcare costs deductible from adjusted gross income for most Americans (above-the-line), up to the average cost of care in their state. This deduction would be phased out for individuals earning more than $250,000 or couples earning more than $500,000.
- Offers credits (“spending rebates”) of up to $1,200 a year for childcare expenses to lower-income families, through the earned income tax credit.
- Creates new saving accounts for care for children or elderly parents, or school tuition, and offers a 50 percent match of contributions.
- Caps itemized deductions at $100,000 for single filers and $200,000 for married couples filing jointly.
- Taxes carried interest as ordinary income.
- Eliminates the individual alternative minimum tax.
Changes to Business Income Taxes:
- Reduces the corporate income tax rate from 35 percent to 15 percent.
- Eliminates the corporate alternative minimum tax.
- Allows firms engaged in manufacturing in the U.S. to choose between the full expensing of capital investment and the deductibility of interest paid.
- Eliminates the domestic production activities deduction (section 199) and all other business credits, except for the research and development credit.
- Enacts a deemed repatriation of currently deferred foreign profits, at a tax rate of 10 percent.
- Increases the cap for the tax credit for employer-provided day care under Sec. 205 of the Economic Growth and Tax Relief Reconciliation Act of 2001 from $150,000 to $500,000 and reduces its recapture period from 10 years to 5.
- Eliminates federal estate and gift taxes but disallows step-up in basis for estates over $10 million.
Please contact us to see how these proposals may impact your individual tax planning.