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Tax & Assurance Guidance

Trump’s Tax Plans – Current Law vs. The Possibilities

Posted on November 10, 2016 by

Margaret Amsden

Margaret Amsden

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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

 

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Margaret Amsden

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Margaret leads the firm’s private client services group as the point person for individual, estate and succession planning tax strategies.

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