Possible Tax Revisions Due to the Election of Donald Trump
Throughout the U.S. presidential campaign, tax reform was a major talking point of candidate (now president-elect) Donald J. Trump. With his election on November 8, here is a summary of potential tax changes that may come after his inauguration:
- Ordinary income tax rates across the board will be cut to just three marginal rates: 12, 25 and 33% (chart below reflects joint filers):
- Repealing the 3.8% Net Investment Income Tax (NIIT) on passive and investment income.
- Repealing the 0.9% Medicare tax on wages and self-employment income over a certain threshold.
- Eliminate the Alternative Minimum Tax (AMT).
- Increase standard deduction to $15,000 and $30,000 for single and joint filers respectively.
- Limit itemized deductions to $100,000 and $200,000 for single and joint filers respectively.
- Eliminate personal exemptions
Estate & Gift
- Repeal the estate and gift tax completely.
- Stepped-up basis at death disallowed for taxable gains over $10 million.
- Reduce the top corporate tax rate from 35% to 15%.
- Business income from pass-through entities (partnerships, S-corporations, & sole proprietorships) will be taxed at 15%.
- Eliminate corporate AMT.
- One-time 10% tax on the repatriation of foreign earnings.
- Tax carried interest at ordinary tax rates versus capital gain rates.
- Increase Section 179 expensing limit from $500,000 to $1 million.
- Manufacturing companies can elect to expense all new capital expenditures.
- Eliminate the deduction for various corporate tax expenditures.