I have to admit that I have been fairly pessimistic that any tax reform will happen, especially in 2017. However, I am hearing from more and more national sources that it is looking more likely to happen. But there are still lingering questions: When will it be enacted? Will it affect 2017? What will be included in the bill? Here is what I am hearing.
It is doubtful that any changes will apply for 2017 even if the bill were to be enacted by end of year. I am hoping that it is done by early 2018 so that businesses and individuals can plan their year.
The tax plan from the President has the standard deduction for individuals doubling and the tax rates going from 7 brackets to 4 brackets of 0%, 12%, 25% and 35%. There is a possibility of an additional rate for high income taxpayers. The capital gains and dividend rate would remain at a maximum rate of 15%.
To fund these reductions, they are discussing eliminating or limiting the deduction of state and local taxes as well as property taxes. As you can imagine, this is causing stress for the Congress people that come from states that have high state tax rates. They do not want to tell their constituency that they got less of a tax reduction than other taxpayers from low taxed states.
There is lots of talk regarding lowering the corporate tax rate so that the U.S. is more competitive. Trump would like to lower it to 15% from 35%. There is talk of a territorial tax rate, which means that U.S. companies would only pay tax on income earned in the U.S.
Trump also wants to get rid of the estate tax – sometimes known as the “death tax” – and the “alternate minimum tax,” which now affects so many of the middle-class taxpayers.
Trump also wants to eliminate federal income taxes for those who earn less than $25,000 if single and $50,000 if married. These taxpayers would still need to send a postcard or one-page form, but no taxes would be owed.
Since the House passed the budget, it is looking even more likely that tax reform could happen. I am sure that you are sitting on the edge of your seat as I am waiting for this to be done. My word of caution to you would be just don’t hold your breath!
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