blog

blog

Unified Tax Reform Framework

Print Friendly, PDF & Email

On Wednesday, September 27th, 2017, President Trump announced some of the details of his tax plan. Below is a brief summary of the major tax proposals from his proposed Tax Reform package. Please don’t hesitate to contact your Somerset advisor regarding the potential legislation including how this potential legislation may impact your 2017 year-end tax planning.

For Individual Taxpayers:

  • Only 3 tax brackets – 12%, 25% and 35%. Legislators will have flexibility to add a 4th bracket to ensure tax reform does not cause the wealthy to pay less than the current system.
  • A substantially higher child tax credit from the current $1,000 per child amount under 17 years of age.
  • The alternative minimum tax (AMT) would be repealed;
  • Doubles the standard deduction to $24,000 for married couples and $12,000 for single filers.
  • Personal exemptions would be eliminated;
  • Many itemized deductions would be eliminated or modified. The plan calls for lawmakers to retain tax incentives for home ownership, retirement savings, charitable giving, and higher education
  • The estate tax would be repealed.

For Business Taxpayers:

  • The C-corporation tax rate would decrease from 35% to 20%;
  • Sole Proprietors, Partnerships, and S-Corporation income will have a maximum tax rate of 25%. Measures will be adopted to prevent wealthy taxpayers from avoiding the top personal tax rate.
  • A one-time low tax rate on existing overseas profits to entice companies to move corporate money back to the U.S.
  • Future international earnings will not be taxed by the U.S. when paid as dividends from a foreign subsidiary when the U.S. parent company owns at least a 10% stake in the foreign subsidiary.
  • To prevent U.S. multinational companies from shifting profits overseas to tax havens, a reduced tax rate will be implemented on foreign profits of such companies.
  • Immediate expensing of the cost of new investments in depreciable assets, other than structures, that are made after September 27, 2017.
  • The deduction for net interest expense incurred by C-Corporations will be partially limited.
  • The Section 199 Production deduction will be eliminated under the theory that such a deduction is no longer needed given the lower corporate and Individual income tax rates.
  • The research and development credit and low income housing credits will be preserved as these are effective in promoting policy goals important in the American economy.