On April 26, the Trump administration outlined its new tax proposal, which leans heavily on tax cuts. So far, President Trump wants to slash individual tax rates, cutting the top rate from 39.6% to 35%, and reducing the number of tax rate tiers from seven to three. He also wants to cut the top tax rate for all businesses to 15% – far below the current top rate.
The administration’s tax outline still leaves many questions unanswered and will be met with skepticism among lawmakers, even though Republicans control Congress. In fact, some GOP aides suggest the White House, with its emphasis on tax cuts and too few details on how they would be paid for, is not contributing to a serious discussion of tax reform.
At this time, the tax plan the Trump administration released last week consists of a single page of bullet points. Lacking a more detailed plan, it is difficult to determine how it would affect corporations, people at different income levels, and who would benefit from different deductions. However, the tax experts at Santos Postal, our partners in Topline Valuation Group, felt it was important to provide you with the following summary:
- Lower individual income tax rates: The proposal calls for reducing the number of tax brackets from seven to three for individuals, which would be set at 10%, 25% and 35%. Today’s rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. However, The White House has yet to specify how much of one’s income would apply to each of the three rates that President Trump is proposing. So it is impossible to say what the change would mean for anyone. The proposal also calls for doubling the standard deduction. Currently, the standard deduction is $6,300 for single filers and $12,600 for married filers filing joint.
- Much lower business rates: President Trump wants to slash the top tax rate for all businesses to 15%, as he proposed during the campaign. That is well below today’s top rate of 35% for corporations, although the real top rate they pay is less after tax breaks. A drop to 15% would also be a huge drop from the 39.6% top rate paid by shareholders and partners of pass-through businesses since the shareholders and partners report profits on their personal tax returns.
- Tax break for child care costs: An outline of the plan calls for tax relief for child care costs, but does not give much detail. During the campaign, the President called for two tax breaks to help ease families’ child care costs. One would let parents deduct the average cost of child care in their state, based on their child’s age. The other would be a tax deduction to anyone who contributes up to $2,000 a year to cover costs associated with child care and elder care.
- Eliminate most deductions: Trump is now aligning himself with House Republicans, by calling for the elimination of all deductions except those for mortgage interest and charitable contributions.
- Repeal a string of taxes: As he did during the election, President Trump will call for the repeal of the Alternative Minimum Tax, the estate tax, and the net investment income tax that applies to wages and investments above a certain level.
Our team will keep you updated as more information becomes available. In the interim, do not hesitate to confidentially contact us at email@example.com or firstname.lastname@example.org if have any questions.
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