President Donald Trump would implement some significant tax changes based on what it was proposed during his campaign. On January 23, 2017 he said from his chair in the Roosevelt Room at the White House “We are going to be cutting taxes massively for both the middle class and for companies”.
Individuals
For individual taxpayers the new tax plan is looking to lower personal income tax rates from seven to three brackets, meaning 12 percent, 25 percent and 33 percent. Americans who make less than $75,000 would pay 12 percent, Americans with earnings between $75,000 and $225,000 would pay 25 percent and those with incomes of more than $225,000 would pay 33 percent.
Individuals earning $112,500 and $190,150 and families earning between $225,000 and $231,450 will see 2 percent – 5 percent increase in their taxes. Under these reforms, taxpayers making between $48,652 and $88,148 annually would save between $1,174 and $7,052, according to the Tax Foundation.
The plan also would increase the standard deduction as follows: For single filers from $6,300 to $15,000 and for married couples filing jointly from $12,600 to $30,000. In regards the caps itemized for deductions would be $100,000 for single filers and $200,000 for married couples filing jointly.
It seems like the proposed plan will not benefit all taxpayers, Mr. Trump’s plan will potentially annul personal exemptions for taxpayers and their dependents as well as the head of household filing status. Consequently, single parents with dependent children and most married households with at least three dependents would pay more in federal income taxes.
Corporations
American business would also have a substantial tax benefit, President Trump said the new administration will slash the corporate tax rate to between 15 percent and 20 percent; down from the current level of 35 percent.
Estate Tax
The tax change also proposed to abolish the estate tax or commonly known as the “Death Tax,” which only applies to estates worth more than $5.45 million for individuals and $10.9 million for couples.
Are you wondering when will the changes take effect? It is still unknown, for now we need to wait until it is discussed in congress and becomes law. In the meantime, remember to take care of your 2016 tax liabilities. If you are not sure how to follow up with your tax responsibilities, give us a call. Our tax specialists at Rosillo & Associates will be happy to assist you.