After a surprise victory, Donald Trump is now the President-elect for the United States. I have already received many questions from clients on the implications of Mr. Trump's election, but the biggest question seems to be: "So what does this mean for taxes?" Normally I keep out of conversations that speculate on tax law changes, but since I'm being overrun with this question, let me explain what I understand about Trump's current tax plan.
(But first, a quick disclaimer. What follows is the current proposed tax changes. Whether or not these changes go into effect, only time will tell.)
The biggest takeaways I get from my review of his tax proposals is: lower taxes for businesses and high net worth individuals, less individual tax brackets, and general simplification of the current tax code.
Here are some of the specific proposals:
- Individual tax rates change to just three brackets: 12% / 25% / 33%
- Business rates change to 15% from 35%
- Increase the standard deduction to $30,000 from $12,600 and eliminate personal exemptions
- Childcare deduction modified to be an above-the-line deduction
- Most corporate tax expenditures removed, except the research and development credit
- Manufacturing firms allowed to expense capital investment the year it is purchased
- Businesses that pay a portion of an employee’s child care expenses can exclude those from income of the employee
You can find more detailed information on Trump’s tax plan website.
Since these tax policies may result in lower funds going to the federal government, it will be up to the new president and congress to find ways to lower expenses as well. Without a decrease in spending the country would need to take on additional debt. A move, I believe, Mr. Trump would like to avoid. For these reasons, it wouldn't surprise me if it takes a good part of 2017 for the government to work thru the nitty gritty and get a tax deal done. Or . . . we may find the new president living up to his campaign promises and punching this proposal through the bureaucracy in record time!
Either way, It looks like a tax policy change is in the country's future.