President Trump: What does it mean for your taxes going forward?
Many business owners are asking, now that Donald Trump is elected, what changes can we expect going forward? Will we be paying less taxes? Below we provide you a summary of what he has proposed:
Different tax rates - Our tax brackets now range from 10% to 39.6%. Trump has proposed streamlining the 7 brackets to only 12%, 25% and 33%. Good news for business owners if Congress passes the law! (Well, it should be easier going forward since the House and Senate are going to be controlled by the “red”?)
Estate tax will be eliminated – Under current tax system, a deceased individual will need to pay a tax of 40% on excess value of 5.45 million assets. Trump proposed to impose tax on an estate valued in excess of 10 million but only when beneficiary disposes the assets. That means no tax immediately upon death.
Reduced corporate taxes - Corporations currently pay a rate of 35%. Trump proposed to reduce it to only 15%. Pass through entities such as S corporation and partnerships will no longer pass through to business owners and these entities will pay a unified rate of 15%.
More individual deductions – Standard deduction is at $12,600 now and itemized deductions begin to phase out when individuals/married couples reach certain income level. Trump would cap itemized deductions at $200,000 and will increase standard deduction to $30,000 ($15,000 if single). The caveat is personal exemptions will be removed, so, depending on various circumstances, there are possibilities that tax rates may go up for certain individuals due to removal of personal exemptions.
Bottom line, if you are a business owner, it is going to be very exciting to observe what is going to happen in the next 12 months, hence if you think tax planning has been really important for you and your business, from this point onwards, we cannot over-emphasize the importance of it especially for your taxes in 2016. Simply put, if you believe that you will have reduced tax rate going forward but will still have higher taxes to pay in 2016, shouldn’t you be thinking of strategies to reduce your taxable income in current year and increase your taxable income in the following year when tax rates decrease in 2017 (if that comes into play)?
Warning: Information above is simply proposals from Donald Trump based on an article from Forbes. While planning for your taxes for 2016, please consult your CPA or tax professional for detailed plan and please do not solely rely on information above because above proposals have not been approved by Congress!