By Liubou Partnaya (Tax Senior Associate, GHJ)
With Donald Trump as President-elect, proposals presented during his campaign are brought to the forefront. Among his proposals are sweeping changes to our income tax laws.
Here is a quick overview of individual and business tax reform positions.
Major highlights for individual taxpayers include:
- Simplifying the tax code with three income tax brackets: 12 percent, 25 percent and 33 percent –instead of the current seven tax brackets ranging from 10 percent to 39.6 percent
- Repealing the Affordable Care Act (“Obamacare”) as well as repealing the 3.8 percent surtax on net investment income ("NIIT"); this surtax applies to certain investment income of higher income taxpayers
- Maintaining existing capital gains rate at 20 percent
- Taxing Carried Interest at ordinary income rates
- Repealing Alternative Minimum Tax
- Eliminating personal exemptions but increasing the standard deduction to $30,000 for Married Filing Jointly ($15,000 for Single)
- Eliminating the Head of Household filing status
- Revising deductions and credits for dependent care
- Capping itemized deductions at $200,000 for Married Filing Jointly taxpayers ($100,000 for Single)
- Repealing estate tax
Major highlights for business taxpayers include:
- Reducing the corporate tax rate from 35 percent to 15 percent
- Capping the tax rate on pass-through business income at 15 percent
- Repealing Alternative Minimum Tax and cap deductibility of interest expenses
- A one-time deemed repatriation of corporate profits held offshore with a tax rate of 10 percent and end of deferral of tax on foreign earnings
- Eliminating tax credits except R&D credit
- Allowing manufacturers to expense capital investment in the United States or deduct interest paid
Overall, the Trump tax plan claims to simplify the tax code for all Americans. The House Republican Blueprint includes many ideas similar to the Trump tax plan and in the months to come both sides will work towards impactful changes to our tax landscape. There are still months of negotiations to come before the revisions of our tax laws are enacted. In the meantime, we are still faced with current tax law and the need for 2016 year-end tax planning. Deferring income and accelerating expenses where possible are still major objectives in reducing your 2016 tax liability.
Please contact your GHJ tax advisor at 310-873-1600 for information regarding your 2016 taxes and how proposed changes may impact your taxes in future years.
About Liubou Partnaya (Tax Senior Associate, GHJ)
Liubou Partnaya has over nine years of public tax and accounting experience providing tax and compilation services to a wide range of clients. Her experience includes corporate, partnership, limited liability companies, high net-worth individuals, trust, and state and local income taxation. She is experienced in trust accountings preparation in accordance with California Probate Code requirements. She also has experience in payroll tax returns, CA sales and use tax compliance. She holds a CPA license and is a member of the California Society of Certified Public Accountants.