On November 8, 2016, Donald Trump was elected President of the United States. He will be sworn in on January 20, 2017 to become the 45th President of the United States.  President-elect Trump will enter the executive branch with a Republican controlled Congress and an empty seat in the Supreme Court.  With help from a Republican controlled Congress, many of the tax law changes proposed by Mr. Trump during his campaign could become a reality in the next four years.  

 

Personal Income Tax

 

Individual income taxpayers would have lower rates with fewer brackets. Our current system has seven brackets ranging between 10% and 39.6%, albeit with the caveat that many top earners pay closer to 43.4% due to Affordable Care Act (ACA) surtaxes. Capital gains rates range from 0%-20%, with top earners paying 23.8% with surtaxes. The President-elect's plan would eliminate the Alternative Minimum Tax (AMT) and ACA surtaxes.  Mr. Trump's plan would create a simpler bracket system for filers:

Ordinary Income Rate	Capital Gains Rate	Single Filers	Married Filers
12%	0%	$0-$37,500	$0-$75,000
25%	15%	$37,501-$112,500	$75,001-$225,000
33%	20%	$112,501 +	$225,000 +

 

Itemized deductions could potentially be reduced for high income taxpayers to a ceiling of $100,000 for single filers and $200,000 for married filers. The standard deduction would increase to $15,000 for singles and $30,000 for married filers.  The personal exemption deduction will be eliminated under the plan. 

 

President-elect Trump also proposes to eliminate the estate tax (mostly). Unrealized gains of an estate valued over $10 million would be taxed when the assets are ultimately sold by the beneficiary and not at death.

 

 

Business Tax

 

Under Mr. Trump's proposed plan, business taxes would undergo a massive change. The plan calls for a top rate of 15% on business income for all businesses, including pass-through entities that retain the profits within the business. However, certain business deductions would also be reduced under this plan. Asset acquisitions could be deducted in full, but companies would lose the ability to deduct interest expense. Bonus depreciation and Section 179 deductions businesses have utilized in the past will be eliminated under the plan because the asset cost can be expensed.

 

The research and development credit many businesses have benefited greatly from would be retained under Mr. Trump's plan. 

 

Note: While we've presented a high-level summary of the potential tax law changes in this BP Blast, not all of the details about Trump's proposal are known at this time. For more information or to discuss these initiatives and how they may impact you, contact your Berntson Porter representative.