With a new administration in our nation’s capital, there is much speculation about a significant change in our tax laws. Campaign promises were abundant (as they usually are) covering a variety of tax reductions for individuals and corporate taxpayers.
Keep in mind the tax proposals made by the incoming administration are nowhere near becoming law, but let’s look at what they want to do.
Individual Tax Brackets
Reduce individual income tax brackets from seven to three. Joint filers would pay tax rates of 12% up to $75,000, 25% from $75-225,000 and 33% over $250,000 (that’s down from 39.6% over $470,700). Brackets for single filers would be one-half of those amounts. The Alternative Minimum Tax would be repealed to the great relief of taxpayers and CPAs alike.
Capital Gains Tax
Capital gains would still be taxed at a maximum of 20%, but the 3.8% surcharge (for “Obamacare”) would be repealed.
Personal Exemption & Standard Deduction
The standard deduction for a couple would go from $12,600 to $30,000, but there would be no personal exemption deduction ($4,050 per person now). Itemized deductions would be limited to $200,000 for a couple, $100,000 for a single taxpayer.
The estate tax would be repealed but capital gains, currently tax-free to heirs, would be subject to tax at death for estates over $10,000,000.
Corporations would see their tax rate lowered from 35 to 15 percent. Many other detailed provisions would help offset some of the revenue loss from this, but those details are still sketchy.
What should one do to plan for this? It’s way too early to make any concrete plans or adjust any tax or other planning strategies based on these ideas. Stay tuned and be informed!