As the 2016 election cycle comes to a close and Republican nominee Donald Trump is elected to become the 45th President of the United States, many taxpayers are wondering what this means to them, their businesses and their families. There is still significant uncertainty as to President-elect Trump’s ability to guide his proposals through Congress. That said, following is a comparison of some of the key provisions of the current law to those included in his most recent tax plan as laid out during the campaign.
Business Tax
| 2016 | Trump’s Plan | |
|---|---|---|
| Corporate Tax Rates | Top rate of 35% | Top rate of 15% |
| Alternative Minimum Tax | Applies to corporations | Eliminated |
| Pass-through Entities | Income taxed as ordinary income on individual tax return | Option to elect a flat tax of 15% on pass-through income retained in the business |
| Capital Investments | Capitalized and depreciated | Option to expense. If expensed, interest costs are non-deductible |
| Corporate Tax Deductions/Credits | Includes Research & Experimentation credit, Domestic Production Activities Deduction, etc. | Eliminate except for Research & Experimentation |
| Childcare Deductions | Employer-provided day care credit capped at $150,000 | Employer provided day care credit capped at $500,000; Additional deduction for employer contributions to employee childcare costs |
| Inversion Transactions | Foreign firms owned 80% or more by U.S. shareholders are considered U.S. firms for tax purposes | No specific proposal |
| Unrepatriated Earnings | Not taxed until brought back into U.S. | One time tax of 10% of total unrepatriated earnings |
Individual Tax
| 2016 | Trump’s Plan | |
|---|---|---|
| Ordinary Income Rates | 7 brackets with top rate of 39.6% | 3 brackets with a top rate of 33% Head of Household status is eliminated |
| Standard Deduction | $6,300 – Single $12,600 – Married $9,300 – Head of Household |
Approximately doubled Head of Household eliminated |
| Personal Exemption | $4,050 | Eliminated |
| Itemized Deduction | Phase out begins: $259,400 – Single $311,300 – Married |
Maximum itemized deductions allowed: $100,000 – Single $200,000 – Married |
| Like-kind Exchanges | Accrued under federal law | No specific proposal |
| Net Investment Income Tax | 3.8% on adjusted gross income above: $200,000 – Single $250,000 – Married |
Eliminated |
| Alternative Minimum Tax | Adjusted gross income above: $200,000 (single) $250,000 (married) Trusts with income over $12,400 |
Eliminated |
| Carried Interest | Taxed at rates on capital gains | Taxed as ordinary income |
| Capital Gains/Dividends Rates | Maximum rate of 20% with one year holding period | No change |
| Child/Dependent Care Expenses | Child/Dependent Care Credit reduced benefit for adjusted gross income over $43,000 | Conversion of existing credit to a deduction in arriving at adjusted gross income. Increases income limitation and varies by state of residence |
| Estate Tax | Exclusion of $5.45 million adjusted for inflation, top rate of 40% | Capital gains tax will apply to estates over $10 million Certain small business exemptions apply |
| Gift Tax | Lifetime exclusion of $5.45 million adjusted for inflation; Annual exclusion of $14,000 per donee |
Eliminated |
| Retirement Savings Contributions | No limit on lifetime contributions | No specific proposal |
