What Will President Trump’s Tax Plan Mean for Businesses, IndividualsDecember 28, 2016
Andrew S. Lattimer, CPA, MST
After one of the longest and most confrontational presidential campaigns in history, Donald Trump has been chosen to be the 45th President of the United States, and for the first time in U.S. history, a nonpolitician who is also a pure businessman will take charge when he is sworn in on January 20, 2017.
One key question both business owners and individuals asked during the election season—and are surely still asking now, as tax season is soon to be upon us with the dawn of 2017—is this: What will a Trump presidency mean for my bottom line?
The answer is, potentially, plenty. The tax structure for businesses and individuals could look significantly different than it does now, once the Republican president takes office and begins work with a Republican Congress.
For starters there is the corporate tax rate. Under President Obama (who spent his first two years in office with Democrats controlling both houses of Congress and the last six with Republicans leading either the Senate, the House or both) the top corporate tax rate was – and still is today – 35%. President-elect Trump has vowed to reduce the top corporate tax rate to just 15% as well as eliminate the Alternate Minimum Tax (AMT), while Republicans in the House are calling for a 20% top rate as well as eliminating the AMT. So with Republicans controlling both branches of government, businesses should expect to see some major changes here.
Additionally, businesses could also see changes with tax rates on future foreign earnings, cost recovery, interest and other provisions, as both the President-elect and House have called for a new direction on each of them. Trump and the House also seem to agree on the continuation of the research tax credit.
On the individual side, the changes could also be substantial, and President-elect Trump and House leadership seem to be in agreement on simplifying and reducing tax rates across the board. Right now there are seven different tax brackets for individuals based on the level of their earnings—10%, 15%, 25%, 28%, 33%, 35% and maxing out at 39.6%. Under the plans of the new President and House Republicans those seven brackets would be cut down to only three, and the rates would be lowered to 12%, 25% and 33%. In the areas of capital gains and other significant tax deductions—including the personal AMT, which both Trump and the House agree should be eliminated—more changes can be expected as well.
Perhaps most dramatically, though, is what could become of the estate tax, as both President-elect Trump and the House Republican leadership favor outright repeal. And considering the estate tax is currently at 40% for everything over $5.45 million, eliminating it could mean a major change in this area.
All of this is preliminary, of course, as the work of negotiating, passing and implementing new tax policy hasn’t even begun yet. But once it does, it’s a good bet that the landscape for businesses and individuals is going to look a lot different at the end of 2017 than it does right now. So it is time for everyone to get ready and start planning accordingly.
How BlumShapiro Can Help:
BlumShapiro is committed to helping our clients realize savings through efficient tax compliance and effective tax planning. We emphasize timely communication and a team approach to servicing our clients’ needs. Hands-on tax partner and tax specialist involvement is provided to ensure that our clients receive the most experienced and in-depth technical expertise that we have to offer. Learn about the variety of tax services offered >>
Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.