ALERT: Incoming president Donald Trump has promised business-friendly tax policies
November 9, 2016
Though Donald Trump’s tax policies have evolved throughout his campaign, the next president of the United States has promoted a vision to cut taxes across-the-board and set regulations that keep jobs local. While any such changes would require Congressional action, this alert provides a brief recap of the primary tax concepts Trump has offered – and in turn, helps you compare this year’s tax environment with what next year’s could be.
Corporate Tax and Business Issues
Trump’s proposed plan would lower the top corporate tax rate from 35% to 15% and eliminate the alternative minimum tax (AMT). Companies would not be allowed to defer taxes on overseas profits. Repatriation of overseas earnings would be allowed with a one-time tax of 10%.
Other than the research and development tax credit, most corporate tax credits would be eliminated.
Manufacturers would be allowed to either expense capital investment or deduct the corporate interest paid. The manufacturer would be required to elect to expense the capital investment. The election can be revoked, but only within the first three years.
As promised during the campaign, Trump would work to repeal the Affordable Care Act.
The employer-provided childcare tax credit would be increased from $150,000 to $500,000 per year and the recapture period would be reduced to 5 years down from 10.
Individual income tax rates would be compressed into three brackets from seven, with a top tax rate of 33%. Those defined as “low income” may pay a 0% tax rate. The three brackets Trump has outlined are:
- Less than $75,000: 12%
- $75,000 - $225,000: 25%
- More than $225,000: 33%
Capital gains would be taxed at 0%, 15%, and 20% using the same brackets above. The standard deduction would be increased to $30,000 from $12,600, with itemized deductions capped at $200,000.
The amounts above are listed for joint filers and would be divided in half for single filers.
The 3.8% net investment income tax and alternative minimum tax would be eliminated as would both personal exemptions and head-of-household filing status.
Trump seeks to repeal both the estate tax and gift tax, but would allow taxation of capital gains of $10 million or more.
Trump also proposes changes to credits and taxation for child care related expenses as follows.
- There would be an above-the-line deduction available for families with incomes under $500,000 joint/$250,000 single. The exclusion is for children under 13 and for eldercare for a dependent.
- Spending rebates for childcare expenses would be available to filers earning less than $62,400 joint/$31,200 single, with a ceiling increase each year.
- Dependent Care Savings Accounts could be established by all taxpayers. Annual contributions are limited to $2,000, with the government providing a 50% match up to $1,000.
Taxpayers whose tax burdens could be affected by these changes should consult their tax professionals as soon as possible. Some tax strategies may require action by year-end, to preserve tax benefits or mitigate potential changes in tax laws.
For more information about how a changing tax environment may affect your situation, please contact your AGH tax professional, or AGH tax senior vice president Shawn Sullivan using his information below.
Senior Vice President
Shawn serves as one of two primary leaders in the firm’s large tax group. He has extensive public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, wholesale/retail distribution, real estate development and management, construction, and contractor industries. In addition to enhancing business performance to minimize tax consequences, he has experience in mergers and acquisitions and international tax and business structuring.
A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA) and chairs the KSCPA Committee on Taxation.
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NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.