Donald Trump was elected the 45th President of the United States last night. You might be wondering: “How would that impact me tax-wise?”
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
If Trump makes good on his promises, here are the expected tax changes:
• Reduce federal tax brackets – from seven to three tax brackets with rates of 12, 25 and 33%. Likewise, the top rate would fall from 39.6 to 33 %.
• Standard deduction increase – from $6,300 to $15,000 for single filers and from $12,600 to $30,000 for married couples filing jointly. And there will be no more personal exemptions.
• Itemized deductions limit – will be capped at $100k for single filers and $200k for married couples filing jointly.
• Take out the 3.8% Medicare tax – this additional tax impacts high income taxpayers who have income over $200k for single filers and $250k for married couples filing jointly or taxpayers who sold appreciated real estate.
• Cancel alternative minimum tax and estate tax – if this estate tax plan holds true, then you can make some arrangements the next 4 years to pass away accordingly.
• Reduction of business tax rate – from 35% to 15%
• 15% business income tax rate – S-corporation, partnership or sole-proprietorship income reported on the personal tax will be taxed at 15%. What does that mean? High wage earner will be paying the 33% tax rate while self-employed will be paying 15% tax rate! That’s a huge difference! You better start working for yourself!
While all these changes look good on paper, this will increase our national debt by $7 trillion dollars because of tax revenue reduction. So the trillion dollar question then is, “what gives”? In order to offset this massive debt increase, the tax plan would require huge reductions in tax benefits from several industries. Which one? Your guess is as good as mine. One thing is for sure though, since the Republican party controls both House and Senate, Trump will be pushing for tax changes, it’s not an if, but when. Stay tuned.
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Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.