Guide to Taxes
Be Prepared for Major Tax Changes Individual and Business Tax Changes on the Horizon BY LORA BILTON ENGLEHART
ONE OF PRESIDENTIAL CANDIDATE Donald Trump’s campaign promises was to overhaul our country’s tax system. Now that he is President Trump, he is working to follow through on that promise. His tax reform plan includes a reduction in tax rates for individual taxpayers and corporations, the elimination of several tax breaks, a restructuring of U.S. Taxes on income from abroad, the elimination of the estate tax and a partial or full repeal of the Affordable Care Act. The House of Representatives and the Senate, of course, must approve any tax changes. “There will be a lot of drama in Trump’s first 100 days of office and tax law changes will be at the center,” predicts Robert S. Smith, CPA and Director of Tax Services for Newark-based Santora CPA Group. Republicans are mostly in accord with Trump’s plan to lower taxes, but the two plans have their differences. Since Republicans control both the Senate and the House, an overhaul of the U.S. Tax code is likely. However, Republicans do not have the 60 Senate members necessary to be filibuster-proof, so they will need to compromise on some issues to get their legislation to pass through the Senate. It is too early to predict the outcome; June is the earliest expected date for voting. According to Robert Freed, Santora CPA Group Principal/Director of Tax Services, a new federal tax platform is a double-edged sword. He observes, “Any federal cuts will result in state tax increases,” as Delaware and other states work to balance their budgets. A major component of the new proposed tax plan would affect individuals by reducing individual tax brackets to three—12%, 25% and 33%. The plan would abolish the head of household filing status, personal exemptions, the Alternative Minimum Tax (ATM), the 3.8% Net Investment Income Tax (NIIT) and the federal gift and estate tax. An exception to the proposed reductions would be an increase in the maximum standard deduction from $12,600 (married, filing jointly) to $30,000. Both Trump’s plan and the House GOP Tax Reform Task Force plan would limit the use of itemized deductions. Proposed changes affecting businesses include reducing the top corporate income tax rate from 35% to 15%. New changes would abolish the DELAWARE BUSINESS
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Robert S. Smith
Robert Freed
corporate alternative minimum tax and limit the tax rate on income from flow-through entities and sole proprietorships to 15%. New changes would also eliminate the Section 199 deduction (manufacturers’ deduction). U.S. manufacturing companies would be able to choose the full expensing of capital investment or the deductibility of interest paid. The proposed tax law would defer taxes on foreign profits at a 10% rate. Changes would also jettison depreciation deductions, while allowing businesses to deduct the cost of asset acquisitions. The tax team at Santora CPA Group stands ready to help companies and individuals navigate these uncharted waters. No single strategy is right for every business or individual, and Santora’s account administrators will compare your current tax plan, answer all your questions and help you strategize on to best take advantage of any new tax law changes. All are welcome to schedule an appointment by calling (302) 737-6200 or (800) 347-0116. n 25