Tax Reform Priorities
Late last month President Trump’s tax plan was released. Trump has stated his major goals for the Tax Reform are to grow the economy and create jobs. In short, provide relief to American families, specifically middle class, and to lower the business tax rate significantly.
How this will affect Individuals
The plan consists of lowering the current 7 tax brackets to only 3 at the following percentages: 10%, 25% and 35%. It has not yet been determined at what income levels those percentages will apply. He also plans on doubling the standard deduction. This will benefit individuals with a simple return, but it may limit the amount of itemized deductions an individual can take. He did, however, specify that he plans to keep the mortgage interest and charitable contribution deductions. Although not specified, there are plans to provide a break for those families with children and/or dependent care expenses. It is also likely that the child care deduction will be increasing as well. Trump also plans to repeal the alternative minimum tax, death tax, and the 3.8% affordable care act tax.
How this will affect Businesses
The plan is also calling for a decrease in the top tax rate from 39.6% to 15%. The outline requires a territorial tax system, which would implement a one-time tax on money that is help overseas, and disregard special interest tax breaks. The plan does not, however, mention boarder-adjustment, or destination-based cash flow as Trump and the Republican Party have discussed previously.
The outline provided is still fairly unclear. We will be watching closely how they will be implemented.
Resources: Journal of Accountancy article “Trump’s Tax Reform Priorities Unveiled” by Paul Bonner 4/26/17
Brandi C. Fesperman, Audit Staff Accountant