Donald Trump’s victory are and his proposed tax plan are making waves in the wake of the election last week. Robert W. Wood from Forbes gives us the 5 ways his tax plan could impact your year-end planning.
With Republicans retaining control over the House and Senate, some tax cuts are inevitable. With this quite extraordinary confluence of events, President-elect Trump and Congress might tell the tax code, “you’re fired!” This could suggest that deferring income into next year if you can might be wise. Next year, the rates should be lower.
1. Individual Rate Cuts
Trump proposes cutting the tax brackets to three: 12%, 25%, and 33%. He would eliminate Obamacare’s 3.8% net investment income tax, too. As a result, the top rate would be 33%, with the top rate on capital gains and dividends a firm 20%.
2. Business Tax Cuts
Corporations currently pay 35%. President-elect Trump would cut it to 15%. But he would eliminate most business deductions. And there would be simplicity. Instead of depreciation over many years, he would allow up-front deductions.
3. Overseas Profits
Trump’s plan would impose up to a 10% deemed repatriation tax on the accumulated profits of foreign subsidiaries of U.S. companies. That 10% toll charge would be payable over 10 years, Trump has proposed. Trump and his team say this change would trigger a huge inflow of funds back to the U.S.
4. No Death Tax
Under current law, you can pass up to $5.45 million to your heirs tax-free. But beyond this, you pay an estate tax of 40%. It is entirely separate from income taxes. The president-elect said he would repeal it entirely. But if the estate tax is repealed, Trump’s proposal would allow income tax on the appreciation inherent in the assets for an estate valued in excess of $10 million.
5. Top v. Bottom
Not everyone is wild about the Trump proposals. Much of the criticism of Trump’s tax plans are that he would give the biggest breaks to the highest earners. Trump and his team have suggested that loosening of capital at the top will encourage investment, trigger transactions, create jobs and fuel economic growth. Change in the tax world is constant. Yet by any standards, some of the tax changes likely in 2017 and beyond are going to be huge.
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