With the election of Donald Trump as President of the United States and the Republicans retaining control of both chambers of Congress, an overhaul of the U.S. tax code next year is likely. President-elect Trump’s comprehensive tax reform plan, released earlier this year, would greatly affect many individuals. The plan proposes to:
- Reduce the number of income tax brackets from seven to three, with rates on ordinary income of 12%, 25%, and 33%. (These new brackets reduce rates for many taxpayers but result in a tax hike for certain single filers.)
- Align the 0%, 15%, and 20% long-term capital gains and qualified dividends rates with the new brackets.
- Eliminate the head of household filing status (which could cause rates to go up for some of these filers, who would have to file as singles).
- Repeal the net investment income tax.
- Eliminate the personal exemption (but expand child-related breaks).
- More than double the standard deduction, to $15,000 for singles and $30,000 for married couples filing jointly.
- Cap itemized deductions at $100,000 for single filers and $200,000 for joint filers.
- Repeal the alternative minimum tax.
- Abolish the federal gift and estate tax, but disallow the step-up in basis for estates worth more than $10 million.
The House Republicans’ plan is somewhat different. Exactly which proposal will make it into legislation and signed into law is uncertain, but it is anticipated that major changes will be enacted. We can help you create the best year-end tax strategy based on how potential changes may affect your specific situation.
For a more comprehensive look at the Trump tax plan, click here to read Berdon’s recent Client Alert.
To discuss how this plan might affect your tax situation, contact me at HZemel@BerdonLLP.com or your Berdon advisor.
Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.