In an announcement last week, the White House proposed individual and business tax reform. The Trump Administration provided very broad outlines and few specifics.
The proposed individual tax provisions include:
- Three tax rates - 10%, 25%, and a top rate of 35%. Down from the current seven tax rates, with a top rate of 39.6%.
- Repeal of the 3.8% tax on net investment income.
- Elimination of itemized deductions other than charitable contributions and mortgage interest.
- Repeal of the Alternative Minimum Tax (AMT).
- Elimination of the Estate Tax.
- Doubling of the standard deduction for individual and married couples.
- Unspecified tax relief for families with child and dependent care expenses.
The proposed business tax provisions include:
- Reducing the top corporate tax rate to 15%. The current top tax rate is 35%.
- Applying the 15% tax rate to business income of pass-through entities such as partnerships, S corporations, and limited liability companies. Administration officials have stated that this provision will contain measures to prevent business owners from converting their compensation income into lower-taxed business income.
- Implementation of a territorial tax system in place of the current worldwide tax regime.
- A one-time tax on business profits in foreign countries repatriated to the United States at an unspecified tax rate.
Please take this opportunity to initiate a conversation with your BPM Tax Advisor regarding your tax goals and objectives. As tax reform legislation becomes more focused, having a good understanding of your plans for the near term and the longer term will allow us to provide you with more proactive tax planning.