On April 26th, the White House released the Presidents tax reform plan. The plans goal and key feature include slashed corporate tax rates, flattened individual marginal income tax brackets, and the repeal of the estate and alternative minimum taxes.
What should you do now?
• Sit tight and wait. The plan was just released and has not yet been proposed in Congress and made its way thru the legislative process. There will be many changes and adjustment before the law is enacted.
• Keep yourself informed. Stay up to date with the changes as the proposals make their way thru the legislative process.
Key Facts:
• The plan is a one-page sheet of bullet points headed “2017 Tax Reform for Economic Growth and American Jobs” and “The Biggest Individual and Business Tax Cut in American History.
• Most of the items on the plan closely follow the presidents campaign promises.
• In order to understand the proposal one needs to rely on various details that were released during the elections campaign.
How does this affect individuals?
• Currently, individuals are taxed seven graduated tiers of marginal rates: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The proposal replaces them with three tiers: 10%, 25%, and 35%
• Retains the deduction for:
o Charity
o Home mortgage interest expense
• Elimination of the
o 3.8% net investment income tax.
o Alternative minimum tax.
o Estate tax.
o Medical expenses deduction
o Personal exemptions
o Most other deductions
How does this affect businesses
• Currently, C corporation are taxed at 35%, the proposal lowers the rate to 15%.
• Pass-through entities. It is expected that partnerships, S corporations and limited liability companies owners will also be taxed at the 15% for their share of income.
• Establish a territorial system of taxation, which generally would exclude from taxation foreign earned income.
• Impose a “one-time tax” on corporate earnings realized and held overseas.
• Eliminate “special interest” tax breaks.
