The Trump Tax Plan in 60 Seconds

On April 26, 2017, President Trump announced a framework for significant tax cuts that could impact individuals and businesses across America. While many details of his plan are still not clear, and a looming showdown with Senate Democrats and perhaps some Republicans is likely, Trump’s plan offers advisors a glimpse into what the future may hold for potential tax reform at some point during the next four years. In a nutshell, the plan would:

• Reduce the existing number of marginal brackets from seven to three: 10%, 25% and 35%
• Maintain favorable rates for long-term capital gains and qualified dividends
• Double the current standard deduction of $6,350 (single) and $12,700 (joint) but eliminate all itemized deductions except mortgage interest and charitable contributions
• Eliminate the alternative minimum tax (AMT) and 3.8% net investment income tax
• Repeal the federal gift, estate and generation-skipping transfer tax
• Reduce the corporate tax rate to 15% and allow pass-through businesses (sole proprietorships, partnerships and S Corporations) to be taxed at the corporate, rather than individual, rates
• Offer businesses a one-time favorable tax rate to repatriate profits currently held overseas

One key item to watch closely is the Senate, where the Republicans control a majority with 52 seats but lack the 60 votes needed to break a filibuster. If Democrats use this tool to prevent a vote on tax reform, legislation can be enacted with a simple majority; however, the changes may expire after 10 years (similar to the Bush tax cuts of 2002).

At this point, it is still too early to provide clients specific advice or planning ideas as any reform is far from certain, but events in Washington are certainly worth monitoring closely over the next few months.

Tax information contained herein is not intended or written to be used, and it cannot be used by taxpayers for the purposes of avoiding penalties that may be imposed on taxpayers. Such tax information and any estate planning information is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice.

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