The Trump Presidency and Taxes

Now that Donald Trump has been elected President of the United States, we will have to live with the reality of the Trump presidency.

Since there are Republican majorities in both the House of Representatives and the Senate, it’s likely that major tax reform will be enacted during 2017 with the most significant changes that we have seen since the Tax Reform Act of 1986, when Ronald Reagan was President, and that many of Trump’s proposals will eventually become law.

Here are some of the major proposals:

• Reduce the current seven tax brackets to three:  12%, 25%, and 33% (Current maximum rate is 39.6%.)  Retain the current 20% maximum rate for long-term capital gains.
• 15% maximum tax rate for business income.
• Repeal or modify health care reform, including repealing the 3.8% net investment income tax and .9% Medicare surtax.
• Cap itemized deductions at $100,000 for singles and $200,000 for married, filing joint returns.
• Increase the standard deduction to $30,000 for joint filers and $15,000 for singles.  (Most taxpayers would no longer itemize their deductions.  Reduces the tax benefits of home ownership.)
• Personal exemptions would be eliminated.  (Hurts big families.)
• Repeal the alternative minimum tax.  (Tax benefits restored if you itemize state income taxes and real estate taxes.  Eliminates tax penalty for exercising incentive stock options.)
• Repeal the estate tax.  Recoup some revenue loss with carryover basis for inherited property exceeding $10 million for married couples and $5 million for singles.
• Expense election expanded for business property.
• One-time 10% tax on untaxed foreign income held abroad for U.S. multinational companies, enabling them to repatriate cash held overseas.
• Tax penalties and tariffs for companies that move manufacturing and other jobs overseas.  Would probably result in higher prices for U.S. consumers.

Since these proposals would substantially reduce federal tax revenues, Congress might decide our country simply can’t afford them.

As American taxpayers do their year-end tax planning, they should consider the impact of these changes for 2017 but understand some or all of them might not be enacted.

Contact Information

Michael Gray

Certified Public Accountant

Michael Gray, CPA

(1) (408)918-3161

mgray@taxtrimmers.com