President Donald Trump recently unveiled a new tax reform proposal titled “2017 Tax Reform for Economic Growth and American Jobs.” This reform calls for considerable changes, and it is important to know how these future revisions could affect you and your business.
For individuals, some of the more important proposals include:
- Tax rates would be reduced to 10, 25 and 35 percent as opposed to the current rates of 10, 15, 25, 28, 33, 35 and 39.6 percent. The income brackets for these rates have not been released yet.
- The standard deduction would be doubled from the current amounts of $6,350 for single filers and $12,700 for joint filers.
- All individual tax deductions, except for the mortgage interest deduction and the charitable contribution deduction, would be eliminated. This includes all “above the line” deductions and personal exemptions.
- The Estate Tax, which is currently 40 percent with a $5.49 million lifetime exclusion in 2017, would be eliminated.
- The Alternative Minimum Tax would be abolished.
Businesses may also have changes coming their way with the following:
- A 15 percent corporate tax rate that is significantly lower than the current maximum rate of 35 percent.
- Owners of S-corporations, partnerships and sole proprietors, who currently have a top tax rate of 39.6 percent, would similarly see a 15 percent tax rate for their pass-through income.
It is essential to remember that at this time this is just a proposal, and changes to the plan will most likely occur before it is signed into law. However, administration officials remain optimistic the tax reform will be passed into law in 2017. While it is important to be aware of the potential impact to you, it is much too early to change tax planning strategies that are currently in place.