Well, many of us are “shell shocked.” His tax reform is substantial. Every business (big or small) will have more to invest in growth. But, the companies must make significant changes to their structure.
You can profit by using the current tax laws this year (2016) and flip to the Trump tax law next year (2017).
Here’s Donald Trump’s tax agenda.
Individual tax rates: Eliminate the seven-tier tax rate structure. Currently, the lowest tax rate is 10 percent, with a high of 39.6 percent.
The new three-tier bracket structure is to be 12 percent, 25 percent, and 33 percent. Business owners will pay more income taxes on their salaries. Apparently, Trump wants you to keep more in the business for growth.
Itemized deductions: Trump intends to curb most itemized deductions but would allow certain exceptions, such as deductions for charitable donations and mortgage interest.
Taxes would not be an itemized deduction. Residents of states with high-income tax rates could be hurt, but not by much. The housing market could drop because of this and the higher standard deduction (more on this in our next newsletter).
Repeal the AMT (Alternative Minimum Tax).
Child care expenses: Replace the existing child care credit with an above-the-line deduction available to both itemizers and non-itemizers, while creating tax-favored accounts for child care.
Corporate taxes: Slashing taxes for corporations. The corporate tax rate will plunge from 35 percent to 15 percent. As I wrote above, Trump wants you to keep more money business for growth. Just announced, the lower tax applies to sole proprietorships, limited liability companies, and s-corporation.
Eliminate estate (death) taxes: The new President will remove the federal estate tax.
At the same time, he will end the step-up in basis on assets (with a special tax law for farms and small business). Heirs will owe income taxes on future sales of homes, real estate, and investments. Currently, these sales can be tax-free.
Small Business: Trump is not for a higher minimum wage. He will cut red tape and eliminate regulations. He will repeal and replace Obamacare.