President Donald Trump’s Tax Plan
What is Donald Trump’s Tax Plan and how does it impact you?
We have previously wrote regarding the different between President Elect Donald Trump’s Tax Plan and Democratic candidate Hillary Clinton’s Tax Plan. We wanted to spotlight how his current plan would impact your tax return. Mind you, there would need to be a bill passed and many things to go down for this to actually come into play. It would not impact you until you were filing your 2017 tax return.
Late last night Donald Trump was elected the 45th President of the United States. Now it’s time that we find out his actual tax plan for the future of the United States and our 2017 Tax Return.
Donald Trump’s Tax Plan by campaign promises
FEWER LOWER TAX RATES
We currently have many different tax brackets based on marital status and income levels. Donald Trump’s Plan would simply this into three tax rates.
No more Affordable Care Act(Obamacare)
Donald Trump has pledged to repeal the Obamacare. This would mean that there would no longer be the additional tax on high income individuals. High-income taxpayers pay an additional 3.8% surtax on “net investment income” — things like interest, rents, royalties, and passive business income. This would lower their taxes by 3.8% which a large chunk of money.
Estate Tax would be eliminated under Donald Trump.
If the campaign promises are true, than we can expect the Estate Tax to be discontinued. This could be a savings of up to 40% depending on how much is in the estate.
Corporate Tax Cuts
Donald Trump’s Tax Plan is to cut corporate tax rate from 35% to 15%. This a huge tax cut and could cause the US to see a a lot of job creation. It does also help the 1% keep a lot of the money in their pockets.
Trump’s Tax Plan Middle Class Impact
Every taxpayer gets to claim on their tax return the greater of 1. certain “itemized deductions,” — think charitable contributions, mortgage interest, real estate taxes, etc… or 2. a “standard deduction.” The standard deduction currently sits at $12,600 (if married, half that if single). In addition, each taxpayer may claim a $4,050 personal exemption for themselves, their spouse, and any dependents.
Trump’s proposal would cap itemized deductions at $200,000 (if married, $100,000 if single). In addition, he would increase the standard deduction from $12,600 to $30,000 ($15,000 if single), and eliminate personal exemptions.
So if you’re scoring at home, a family of five that currently claims the standard deduction will actually lose deductions under the Trump plan: under current law, they would be entitled to a $12,600 standard deduction and $20,250 of personal exemptions, for a total tax benefit of $32,850. Under the Trump plan, that would be replaced with a $30,000 standard deduction and no personal exemptions.
In addition, as highlighted above, the bottom rate of 10% will be replaced with a new bottom rate of 12%. Combine this with the lost deductions described above — as well as the elimination of the “head of household” filing status under the Trump plan — and according to a study performed by Lily Batchelor at NYU, you have a perfect storm in which approximately 7.8 million low-income large families will experience increased tax bills under the Trump plan.
This could all change in 2017. We will have to wait and see what is proposed by President Donald Trump then. The Tax Foundation released a great tax calculator based on the tax plans, see the Tax Foundation Tax Calculator.