Details of the Recently Proposed Tax Reform Plan

Proposed Changes for Individuals:

  • Consolidate the current seven income tax brackets into three, with rates on ordinary income of 10 percent, 25 percent, and 35 percent, although the income level at which these rates would apply was not announced
  • Double the standard deduction, which would increase to $12,700 for single taxpayers, and to $25,400 for married couples filing jointly
  • Limit itemized deductions to only mortgage interest and charitable contributions, eliminating the deductions for medical expenses, state and local income and sales taxes, investment interest and other miscellaneous deductions
  • Eliminate the Net Investment Income Surtax of 3.8% imposed on unearned income and gains of high-income taxpayers under the provisions of the Affordable Care Act
  • Provide additional tax relief for families with childcare and dependent care expenses
  • Eliminate the Alternative Minimum Tax
  • Eliminate the Estate Tax

Proposed Changes for Businesses:

  • Reduce the maximum corporate income tax rate from 35 percent to 15 percent and extend it to the individual-level taxation of so-called pass-through entities, such as S-corporations and partnerships
  • Implement a territorial system of taxation in which business would only pay tax on income earned in the United States
  • Impose a one-time tax on corporate earnings realized and held overseas and on which tax had been deferred

Of course, these are all preliminary proposed changes, and we expect the actual final tax law will differ in some or many aspects.  We will provide further information as this legislative process moves forward.  Please contact our office if you would like to discuss how these proposals could affect your business and personal tax decisions.