Tax Laws are Complicated. We are Here to Make it Easier.
President Trump’s Administration has developed a more cohesive tax reform plan over the last couple of months. Although there are still details that need to be worked out, at Stevens Pierce & Associates, CPAs in Twin Falls, ID, we want you to be prepared. In this blog post, we will discuss the changes that have been proposed so far that could affect you, your family or your small business
, and what you should know about them.
Decreased Tax Brackets
Currently, there are seven tax brackets. The Trump Administration intends to decrease the tax brackets to three. Each of these three tax brackets would have a reduced lower income tax rate. The lowest bracket would have a 12% income tax rate, the median bracket a 25% rate, and the highest bracket a 35% rate.
Standard Deduction & Itemized Deductions
When you file your taxes, you can choose to provide itemized deductions, or opt for the standard deduction, which is a flat amount of deduction you can receive off of your taxes. Under the new plan, for married couples, the deduction would about double to $24,000, while for single filers, it would double to about $12,000.
The plan also aims to eliminate the ability to itemize deductions, except in the case of home mortgage interest and charitable contributions.
No Personal Exemptions
Current personal exemptions allow tax filers to subtract $4,600 from their taxable income per person claimed on their return. The Trump Administration plans to get rid of personal exemptions. In addition, blind taxpayers and those over 65 will not receive the standard deductions they currently receive.
No Alternative Minimum Tax
The Alternative Minimum Tax was originally designed to prevent the wealthy from abusing deductions and not paying a fair amount of taxes. Those subject to the AMT submit their taxes once using standard income tax rules and then again using AMT rules. They then pay the higher amount of taxes. The Trump Administration plans to get rid of the AMT.
Increase Child Tax Credit
The Child Tax Credit allows families to gain a credit of up to $1,000 per child, depending on your income. The Trump Administration plans to increase this credit, the amount by which it has not been determined. as well as the income level that can benefit from it.
Estate Tax & Generation-Skipping Transfer Tax
The estate tax is a tax you pay on the amount of an estate you inherit if it exceeds a certain amount. The generation-skipping transfer tax is a tax on property given to an unrelated person over 37.5 years younger than the giver, or to grandchildren or great-children. The Trump Administration plans to repeal both of these taxes.
The plan reduces the maximum corporate tax rate from 35% to 20%, meaning corporations will be paying less in taxes.
Small Business Taxes
The maximum tax rate for small businesses will be lowered to 25%. However, most small businesses do not meet the earning requirements for the maximum rate, so this cut will not affect most small businesses.
Full expensing means that the government invests in capital expenditures made by businesses. Trump’s plan is to allow full expensing, except in the case of purchasing structures, for five years. The intention in allowing businesses to do full expensing is to increase willingness to invest.
Trump intends to partially limit the deduction on C Corporation net interest expenses, which would in turn raise the cost for banks to borrow, lend and invest, which may result in a decrease in stock prices.
Deductions & Credits
The Trump Administration wants to repeal the majority of deductions and credits for businesses, except for credits for both research and low-income housing.
Business in Other Countries
The plan would decrease taxes on foreign profits made by U.S. multinational corporations, as well as provide a 100% tax exemption for income that businesses make overseas.
If you have any questions about how this proposed tax plan would affect you, your family, your small business or your investments, please contact us
today at 1-208-734-8662
and our experienced accountants will be happy to assist you. We are proud to help individuals
and small businesses with tax planning and preparation
as well as with all of their accounting needs!