Clayton & McKervey, an international certified public accounting and business advisory firm located in metro Detroit, offered a summary of President Trump’s tax reform plan, announced today and titled A Unified Framework for Fixing Our Broken Tax Code. The summary was prepared by Suzanne Tuson, CPA, MST, a shareholder in the firm’s international tax services department.
In reviewing the proposed reforms for individuals and families, Tuson summarized the following key reforms:
- Create a larger “zero” tax bracket by increasing standard deductions to $24,000 married filing jointly and $12,000 for single taxpayers
- Consolidate current seven tax brackets to three brackets of 12%, 25% and 35%, but leave congress the option of creating an additional higher bracket for higher income taxpayers
- Repeal personal exemptions for dependents and increases the Child Tax Credit
- Increase income levels at which the Child Tax Credit begins phase out
- Make the first $1,000 of the Child Tax Credit refundable
- Provide a $500 non-refundable credit for non-child dependents
- Repeal Alternative Minimum Tax (AMT)
- Eliminate most itemized deductions, but retain tax incentives for home mortgage interest and charitable contributions
- Retain tax benefits that encourage work, higher education and retirement security
- Repeal death tax and generation skipping transfer tax
In reviewing proposed reforms for business, Tuson summarized the following key reforms:
- 25% Maximum tax rate applied to business income of small and family owned businesses conducted as sole proprietorships, partnerships and S corporations
- 20% Corporate tax rate
- Eliminate Corporate Alternative Minimum Tax
- Immediate expensing of the cost of new investments in depreciable assets other than structures made after September 27, 2017 for at least five years
- Limit deduction for net interest expense incurred by C corporations
- Eliminate Section 199 Domestic Production Deduction
- Retain Research and Development and Low-Income Housing Credits
- Modernize rules related to special tax regimes for specific industries
- 100% exemption for dividends from foreign subsidiaries (in which the U.S. parent owns at least 10%)
- Treat accumulated foreign earnings as repatriated under the transition to the new system
- Tax at a reduced rate and global basis the foreign profits of US multinational corporations
“Today’s news perhaps raises more questions than provides answers, but we expect further details and implications of the reforms will come to light over the next several days and weeks,” Tuson said.
