How Will the Election Results Impact Taxes?
On January 20, 2017, Donald J. Trump will be sworn into office as the 45th President of the United States. With a Republican House and Senate, we are likely to see changes in the way of tax law. The following is a summary of President-elect Trump’s current statements and proposals on tax policy:
- Corporate tax rate decreases from 35% to 15%
- Lowering the individual ordinary income tax rates and reducing the amount of income tax brackets from seven to three as follows: 12% (to replace the 10% and 15% brackets), 25% (to replace the 25% and 28% brackets) and 33% (to replace the 33%, 35%, and 39.6% brackets).
- Capital Gains and Qualified Dividend rates to remain unchanged.
- Elimination of the Estate Tax and resulting elimination of the basis step-up to heirs at the date of death.
- Repeal of the Affordable Care Act and associated Net Investment Income Tax.
- Elimination of the Alternative Minimum Tax (AMT).
- New deductions for childcare and elder care, including incentives for employers to provide such benefits.
- Increase in the Standard Deduction to $15,000 for single taxpayers (up from $6,350) and $30,000 for married taxpayers filing joint (up from $12,700).
- Implementation of a cap on itemized deductions of $100,000 for single taxpayers and $200,000 for married taxpayers filing joint.
- Elimination of the Head of Household filing status.
- Carried interest to be treated as ordinary income as opposed to capital gain income.
- Increase in Section 179 expensing of qualified capital assets from $500,000 to $1M.
- A “one-time” reduced tax rate for repatriation of offshore profits.
Of course, the extent of these changes, as well as the time frame for implementation, depends on the cooperation of the newly elected Congress. We will keep you informed as developments unfold; however feel free to contact our office to discuss how the possible changes may affect your tax planning.