Now that one of the most talked about elections has come to a result, everyone is left in speculation about Donald Trump and his administration’s policies. Which items he will carry through and how it will personally affect us. One of the items that he has said will receive the largest reform, is taxes. How does this new tax plan look? According to his website,
The Trump Plan will revise and update both the individual and corporate tax codes:
Individual Income Tax
The Trump Plan will collapse the current seven tax brackets to three brackets. The rates and breakpoints are as shown below. Low-income Americans will have an effective income tax rate of 0. The tax brackets are similar to those in the House GOP tax blueprint.
Brackets & Rates for Married-Joint filers:
Less than $75,000: 12%
More than $75,000 but less than $225,000: 25%
More than $225,000: 33%
*Brackets for single filers are ½ of these amounts
The Trump Plan will retain the existing capital gains rate structure (maximum rate of 20 percent) with tax brackets shown above. Carried interest will be taxed as ordinary income.
The 3.8 percent Obamacare tax on investment income will be repealed, as will the alternative minimum tax.
The Trump Plan will increase the standard deduction for joint filers to $30,000, from $12,600, and the standard deduction for single filers will be $15,000. The personal exemptions will be eliminated as will the head-of-household filing status.
In addition, the Trump Plan will cap itemized deductions at $200,000 for Married-Joint filers or $100,000 for Single filers.
The Trump Plan will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both small and large, that want to retain the profits within the business.
It will provide a deemed repatriation of corporate profits held offshore at a one-time tax rate of 10 percent.
The biggest surprise about this plan is not what it contains, but rather what it does not contain. It does not contain a plan to change capital gains tax. Many owners have banked on the idea that Trump will reduce the current 15-20% capital gains tax to a rate that would motivate them to take action. A lower capital gains tax would spur many owners to consider selling their assets and generate activity in the real estate market. Though nothing is set in stone, it seems we can assume that capital gains tax will remain untouched.