The Trump administration released on Wednesday a draft of its proposed tax reform to the public, outlining several key items that could significantly impact taxpayers, if it becomes law. These changes would not only impact businesses but individual taxpayers as well. In its current form, the proposed tax plan would:
- Reduce the top corporate tax from 35 to 20 percent
- Create three individual income tax brackets: 12 percent, 25 percent and 35 percent
- Set the top tax rate for income from certain flow-through entities at 25 percent
- Eliminate the alternative minimum tax for corporations and individuals
- Increase the standard deduction to $12,000 for single taxpayers and $24,000 for married taxpayers, while eliminating personal and dependent exemptions
- Repeal the estate tax
In order to accommodate these tax cuts, Congress will need to discuss many other offsetting provisions. Possible options include eliminating certain itemized deductions (such as state and local taxes), deemed repatriation of overseas funds, and the domestic production activities deduction.
Although these changes provide many differences from the current structure, it is still early in the process. The plan will undergo many rounds of negotiations before the final bill could be passed by Congress and signed by President Trump to become law. Consequently, any one of these items could be different in its final form. There is also some uncertainty as to when these changes would go into effect, but some have suggested these may not be retroactive as some prior laws have been. Nevertheless, your advisors at 415 Group will closely monitor the situation and continue to alert you to any resulting developments. We’ll provide the insights you and your business need to adapt to these potential changes.