How much do you know about new president-elect Donald Trump’s tax plan? To begin with, he has proposed the largest tax cuts since Ronald Reagan.
If Trump were to get everything he has proposed from a Republican-controlled Congress, a taxpayer who earns between $48,000 to $83,000 a year would save about $1,000 under his plan, said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
People in the top 0.01 percent, making $3.7 million or more in a year, would receive $1 million in annual tax savings.
In any case, if Trump stays true to his campaign promises, here are some things his administration could change:
- Minimizes seven federal tax brackets down to three with rates of 12 percent, 25 percent and 33 percent. The top rate would fall from 39.6 percent to 33 percent.
- Raises the standard deduction from $6,300 to $15,000 for single filers and from $12,600 to $30,000 for married couples filing jointly while ending personal exemptions.
- Cap itemized deductions at $100,000 for single filers and $200,000 for married couples filing jointly.
- Eliminate the 3.8 percent tax on net investment income on people who have a modified adjusted gross income of over $200,000 for single filers and $250,000 for married couples filing jointly.
- Repeal the alternative minimum tax and the estate tax.
Trump has also proposed taxing income from carried interest at ordinary income tax rates. This will not only affect hedge fund managers, but high earners with investment income, said Joshua Milgrim, a tax partner in Dechert’s New York office.
How Trump could pay for cuts
Trump has proposed no net spending reductions to offset his tax plan’s $7 trillion increase in the debt, according to the Committee for a Responsible Federal Budget’s estimates.
The plan borrows heavily from a tax proposal from House Republicans. Gleckman will be watching what Senate Finance Committee Chairman Orrin Hatch will do. The Utah senator’s plan differs from Trump’s and the House GOP plan.
Whatever comes to pass, you will likely see changes to your taxes during the Trump administration. “I think we are going to get major tax reform,” Gale said. “It is the one thing that unites the Republican Party and they have all the levelers of power.”
Stay informed about tax changes by calling Scott A. Kunkel, CPA PC today in North Richland Hills at 817-498-1040.
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