It was a contention election this year and one of the driving points was the economy. There has been a lot of speculation regarding tax policy changes under the Trump administration. The tax theme for his campaign was tax relief for middle class Americans. Based on what we have seen so far, here are a few points that you might expect to happen in the next four years. Because of their close similarities to the House Republican’s plan, many of these are likely to gain traction.
Let’s start with some changes that could impact individuals. The below are limited to taxes at the individual level. They are designed to simplify the tax code and lower your tax bill slightly.
- Simplify the tax code from 7 brackets to 3. They are likely to land around 12%, 25% and 33%.
- Increase the standard deduction
- Eliminate the marriage penalty
- Eliminate the NIIT (Net Investment Income Tax – also known as the Medicare Surcharge) and AMT (Alternative Minimum Tax)
- Exclude child care expenses from taxation
- Eliminate the “death tax” in favor or recognizing capital gains at death for estates worth over $10.0 M
Since President Trump is a business-minded individual, we should expect more policy changes related to businesses. These changes are designed to encourage more economic growth. Some of the potential changes include the following:
- Allowing businesses to expense immediately the costs related to new business investment
- Reducing the business tax rate to 15% or 20%
- Providing for a one-time repatriation of offshore earnings taxed at a 10% rate
- Repealing and replacing the Affordable Care Act which, would is designed to reduce business and family health care costs
With a Republican-led House and Senate eager to pass new tax policies designed to grow the economy, it is likely a new tax bill will be signed by the middle of next year. Something similar to the above outline is a strong possibility. Let’s hope it has the intended effect on the economy and on our wallets!