Here are the major points of Trump’s Tax Plan that will impact your personal taxes:
Decreased Tax Brackets and Rates: Trump’s tax plan calls to reduce the number of tax brackets from the current 7 brackets (10%. 15%, 25%, 33%, 35% & 39.6%) to just 3 brackets as follows:
- 12% rate for income up to $75k for Married Couples or $37.5k for Single Individuals.
- 25% rate for income between $75k and $225k for Married Couples and between $37.5k and $112.5k for Single Individuals.
- 33% rate for income over $225k for Married Couples and $112.5k for Single Individuals
Retain Current Capital Gains Rates: The current rates for long-term capital gains are currently 0% for people in the lowest tax brackets, 15% for people in all but the highest tax bracket, and 20% for anyone in the highest bracket. Trump’s plan will continue with these three rates for long-term capital gains.
Repeal the 3.8% Medicare Tax on Investment income: The 3.8% Medicare Tax was instituted in 2013 and hits Single Individuals who earn more than $200k and Married Couples who earn more than $250k pay this tax on their investment income.
Increased Standard Deduction: Trumps plan will increase the standard deduction to $30k for Married Couples (up from $12.6k in 2016) and to $15k for Single Individuals (up from $6.3k in 2016). His plan also calls for the elimination of Personal Exemptions ($4,050 per person in 2016) and the Head of Household Filing Status.
Any changes to the Tax Code must first go through Congress. With a Republican majority in both the House and the Senate, it will be interesting to see what tax changes are heading our way in 2017.