One month into a new presidency. He’s checking things off his list he promised to do. One yet to be done has to do with major tax reform.
There’s not enough room in a small column like this to go over all Donald Trump’s proposals, but here are a few that will impact most Americans which seem to have a high likelihood of getting passed through Congress.
Corporate taxes will go down! Currently the top rate is 35 percent, which is so much higher than almost the entire rest of the world we’re experiencing companies repatriating to other countries to escape this burden. The Donald wants to drop it by more than half to 15 percent. Congress will probably settle somewhere in the low 20s, though.
One of Trump’s proposals that might happen is to tax all businesses, regardless of entity type at the same rates. As an example, that means a self-employed business owner reporting on Schedule C of their personal tax return will see their business earnings taxed using the same lower rates. Probably like what is currently done with Capital Gains and Qualified Dividends (a separate tax computation worksheet).
One-time 10 percent tax on repatriated corporate earnings from overseas. The purpose is to get large corporations who have large stashes of cash offshore to bring it back into the U.S. and invest it in U.S. job growth. Some estimates are 2-3 trillion dollars would come back into the U.S. if this were enacted. Do we hear money to build the wall? (10 percent of 3 trillion dollars is $300 billion)!
Expensing all new manufacturing investment rather than capitalizing the costs. Currently, when a company expands a plant, it usually has to write that off over many years. The president is proposing to allow writing off 100 percent of new investments into expanding operations in the U.S. for manufactures all in one year. This defers tax a bit, but over the long haul, the U.S. government would get the same tax, and probably more if those investments increase business profits. (Downside would be the elimination of the Section 199 manufacturing deduction and all other business credits except research credit).
Individuals would see some major beneficial changes as well. Simplify the tax rate structure down to just three rates (12 percent, 25 percent, and 33 percent). The Standard Deductions would jump up to $15,000 for singles and double that to $30,000 for married folks. Alternative Minimum Tax (a disaster that doesn’t do what it was designed to do) is on the chopping block. So is the Obamacare Net Investment Income Tax. An increase in Earned Income Tax Credit, and providing an above-the-line deduction for dependent care expenses is also highly likely.
Did you hear? Proverbs 22:11: “He who loves purity of heart and has grace on his lips, the king will be his friend.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. He’s on the web at BullisAndCo.com and on Facebook.