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Posted on: Dec 9, 2016

Breaking it Down: President-Elect Donald Trump's Proposed Tax Legislation

By Julie Camden, Camden & Meridew PC

Under Mr. Trump’s proposal, tax rates for married taxpayers with income less than $75,000 is supposed to be 12%. If income is between $75,000 and $225,000 and you're a married taxpayer, the tax rate is supposed to be 25%. For taxpayers earning more than $225,000 the rate is supposed to be 33% if you're a married taxpayer. If you're a single filer, it should be half of the amounts above. The standard deduction for married filers would increase to $30,000. Taxpayers with total income over $500,000 combined would not be able to claim an above the line deduction for children under age 13, which would be capped at the state average, as well as eldercare for a dependent.  

The plan also proposes that low income Americans should have a tax rate of zero. The standard deduction for single filers would be $15,000. While capital gains would remain the same, carried interest would be taxed as ordinary income. Currently, the Affordable Care Act causes a 3.8% investment income tax, which Donald Trump proposes repealing, as well as the Alternative Minimum Tax (AMT), and estate and generation-skipping taxes. However, with regards to the estate tax, capital gains on property held until death, with a value over ten million dollars would be subject to tax, with an exemption for small businesses and family farms. Contributions of appreciated assets into a private charity established by the deceased or his relatives would be disallowed. A taxpayer with total income over $250,000 would not be able to claim an above the line deduction for children under age 13, which would be capped at the state average, as well as eldercare for a dependent.      

The Trump plan proposes eliminating personal exemptions as well as the head of household status. Also proposed, is capping itemized deductions at $200,000 for married couples, and $100,000 for single filers. Many itemized deductions would also be eliminated, excluding the mortgage interest deduction and the charitable contribution deduction. Also, tax incentives for retirement would continue.  

Under this plan the business tax rate would be reduced from 35% to 15%, the corporate tax rate to 20%, and to eliminate AMT. Offshore profits may have a one-time tax of 10%. Most corporate tax expenditures would be eliminated, excluding the research and development credit. However, there would be an immediate expensing of the cost of business investments. Net operating losses would also carry forward indefinitely. The business tax credit cap for on-site daycare would be increased to $500,000 a year (more than 3 times the current amount) and the recapture period would be cut in half to five years.    

Additionally, the plan also proposes a rebate for child care expenses trough the Earned Income Tax Credit equal to 7.65% of remaining eligible childcare expenses, with a cap. The joint income level for this credit is $62,400, and the single income limit is $31,200). Additionally, all taxpayers could establish a Dependent Care Savings Account limited to $2,000 a year, which would be matched by the government at 50% of what the parents give up to $1,000 a year.

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