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.
Dependent Care Expenses: Get ready for big changes to the tax breaks associated with paying for dependent care expenses. Please check out Trump’s webpage that outlines his tax plan for more info.
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.