Tax Update: Trump’s Proposed Tax Cuts
At a press conference in Washington D.C. on April 26, President Trump’s proposed tax changes were announced, with a heavy emphasis on the reduction of individual and corporate tax rates. The administration’s proposed changes also include the elimination of the alternative minimum tax (AMT) and federal estate tax, as well as the elimination of net investment income tax (NIIT) for high earners. The tax changes proposed by the White House would most significantly affect individuals and businesses.
CHANGES FOR INDIVIDUALS
President Trump’s proposal includes a reduction of the current number of tax brackets (7) to just 3 rate brackets of 10, 25, and 35 percent. The standard deduction would also be doubled under the proposed legislation, a decision that according to National Economic Council Director Gary Cohn would make tax filing less complicated for most Americans. Also included in the proposed plans is the elimination of most individual credits and deductions, with the exception of charitable deductions and mortgage interest. The existing structure of dividend taxes and capital gains is expected to remain in place. Assistance for families with child care expenses was also included in the proposal, but the details have not yet been announced.
CHANGES FOR BUSINESSES
The White House proposed a corporate tax rate cut from the current rate of 35 percent to 15 percent, a rate for which sole proprietorships, partnerships, and S corporations—or “pass-through entities”—are expected to qualify. Under the tax reform proposal, there would be a one-time tax on unrepatriated overseas earnings. Going forward, corporations would not be required to pay taxes on foreign profits; instead, President Trump proposed moving to a “territorial” tax system.
The tax reform plan as it was announced is expected to be the most significant tax reform legislation in several decades, though much remains to be seen. The reform proposal components are likely to change before anything is finalized, and we will provide updates as the proposed legislation continues to develop. For tax inquiries or information about our services, please contact us at firstname.lastname@example.org or (212) 245-5900.