Today we face a total paradigm shift in our government. Donald Trump is the President-Elect of the United States of America. So, with that in mind, what changes can individuals expect in our tax lives? Don’t worry. This won’t affect your 2016 tax returns.
Eliminate all those annoying tax brackets and knock them down to just three – 12%, 25%, 33%, while expanding the earnings within those brackets.
12% to $37,500 – S ; $75,000 – MFJ (was 0% – 15%)
25% 37,501 – $112,500 – S; $75,001 – $225,000 – MFJ (was 25% – 28%)
33% $112,501 and above –S; $225,001 and above MFJ (was 28% – 39.6%)
Raise the Standard Deduction to $15,000 for singles and $30,000 for joint returns
That should eliminate the need for most people to use any deductions at all, making life a bit easier. Bye, bye Schedule A.
Eliminate personal exemptions altogether
That means, families with lots of children won’t get the extra per-person tax break – in 2016, it’s worth $4,050 per person – or $28,350 for a married couple with 5 children. So this isn’t really helpful for large families
Eliminate the Head of Household filing status altogether.
So, that would mean a single mom with one child would file as single and have no personal exemption for herself or her child.
Current value – Head of Household – $9,300 + 2 exemptions – $8,100 = $17,400. Replaced with the Single Standard Deduction of $15,000
Eliminate the 3.8% Net Investment Income Tax – which affects individuals with incomes in excess of $200,000 or couples in excess of $250,000. That was kind of a marriage penalty for couples, anyway.
Repeal the Alternative Minimum Tax (AMT). Hooray!
It currently affects singles at $53,900 and couples at $83,800. That level of income doesn’t go very far in urban areas, especially if you have children.
Eliminate the estate tax altogether
But along with it, eliminate the step-up in basis at date of death.
Exclusion from capital gains taxes for up to $10 million worth of assets.
There are lots more provisions. The plan is a mixed bag of goodies and sillies. As yet, the cuts are in the trillions of dollars with no offsets to make up the differences. Congress will need to review the concepts and hash out a whole new tax plan in the coming years. Just know there will be changes. Hopefully, some of them will simplify your lives. – TaxMama