Congratulations to President-Elect Trump for pulling off an upset victory over Democrat candidate Hilary Clinton earlier this month. As we all know, some politicians will say and promise anything to win your vote and get elected into office. 

When it came to U.S. income taxes, President-Elect Trump’s campaign platform included many tax cuts and reform. It remains to be seen whether or not we will see any of these tax cuts after he takes over the Oval Office in January of 2017 or will most of them be added to the numerous broken promises of previous President-Elects. 

As of now, the following proposed tax changes are based on campaign materials and have yet to been refined and made into tax law. Tax policy makers may be busy in the coming months to figure out the details as well as when and how to implement the changes. 

Corporate Income Taxes 

One of the most significant tax cut that President-Elect Trump proposes is the reduction of U.S. federal corporate income tax to a flat 15% tax rate. The current federal corporate income tax rates are based on gradual tax brackets topping out at a maximum rate of 35% which results in a potential 20% tax savings for large profitable companies. The 15% federal corporate income tax rate extends basically to most non-incorporated businesses such as sole proprietorships, partnerships and S Corporations for profits that are put back into the business. 

Trump also promises to double the small business equipment (and other qualifying assets) expensing election to $1,000,000 as well as immediate deduction of all new equipment investments (currently the deduction is at 50%) therefore removing the need for small businesses to depreciate any equipment purchases over the asset’s useful life for tax purposes. 

In order to encourage companies to invest their profits in the U.S. President-Elect Trump has proposed a “tax holiday” for U.S. companies to repatriate offshore earnings of their foreign subsidiaries. The plan is to allow companies to bring back foreign earnings at a 10% toll charge payable over 10 years. Large profitable corporations normally pay up to 35% in federal income tax so this could mean a significant tax break for American public companies such Apple, Google and Microsoft. Economists currently estimate there is over U.S. $2 trillion of cash sitting offshore. A similar tax holiday was implemented in 2004 under the Bush administration but the plan did not appear to create more jobs or boost the American economy. A dozen years later even more money flowed offshore due mainly to high U.S. corporate tax rates. It could however be different this time around if coupled with the proposed reduction of the U.S. corporate federal tax rate to 15% 

Individual Income Taxes 

While not as extensive as the corporate tax cuts, the current U.S. individual income tax rates which gradually range from 10 to 39.6 percent with seven tax brackets will be reduced to three brackets of 12, 15 and 33 percent under Trump’s plan. Most low income families with income less than U.S. $30,000 

would essentially pay little or no tax under the new plan. Despite that, it appears that the plan already has some flaws that could result in a lower income families or individuals paying more tax than before the cut in tax rates if the low-income family has a large number of dependents.

Click here to read more of this article...