Nov 14 Tax Alert: Post-Election Update

Taxes took center stage in much of the pre-election rhetoric from both presidential candidates. Now that Donald Trump has secured his place in the White House, what tax changes may be in store for you and your business?

Although no official policies will be passed until after President-elect Trump takes office in January, here are some of the most significant proposed tax law changes based on his campaign:

Income Tax Changes

Instead of seven tax brackets capping out at the current 39.6 percent, Trump has proposed three brackets in which rates on ordinary income would be 12, 25 and 33 percent.

His plan also calls for increasing the standard deduction to $15,000 for single individuals and $30,000 for married couples filing jointly (currently $6,350 and $12,700 respectively in 2017).

Trump has further proposed that itemized deductions be capped at $100,000 for single filers and $200,000 for married couples filing jointly.

Finally, under Trump’s plan, carried interest would be taxed as ordinary income.

Individual Tax Law Repeals

Throughout the campaign, Trump has expressed his intention to repeal or eliminate the following:

• Repeal the 3.8 percent net investment income (NII) tax imposed on capital gains and other passive income
• Repeal the federal estate and gift tax
• Eliminate the alternative minimum tax (AMT)
• Repeal the Affordable Care Act (ACA)

Business Taxation

President Elect Trump has indicated that his policy would include the following changes to corporate taxation:

• Lower the business tax rate to 15 percent (current rates top out at 35 percent)
• Eliminate the corporate alternative minimum tax (AMT)
• Increase the annual cap on Section 179 expensing from $500,000 to $1 million

Trump’s plan would also affect “pass-through entities” (sole proprietorships, partnerships and S corporations) specifically. These small business owners could elect to be taxed at a flat rate of 15 percent on their pass-through income retained within the business, rather than be taxed under regular individual income tax rates of up to 33 percent.

International Tax Changes

During the campaign, Trump also proposed to provide a deemed repatriation of corporate profits held offshore at a “one-time” reduced tax rate.

Stay Alert

As we learn more about the specifics of Trump’s tax policies over the next few weeks and months, Sax will keep you informed of the changes and their impact on your current and future tax planning.

If you have any questions, please contact a Sax advisor at (973) 472-6250.