Donald Trump will take office in January 2017. What does this mean for tax season?
Fortunately, the upcoming 2016 tax season will see few changes. Trump’s proposed policies will start to go into effect for the 2017 tax season.
According to http://www.TaxFoundation.org, income tax refunds may increase, reflecting on their website the following: “On a static basis, the Trump tax plan would increase the after-tax incomes of taxpayers in every income group. The bottom 80 percent of taxpayers (those in the bottom four quintiles) would see an increase in after-tax income between 0.8 percent and 1.9 percent, under both policy assumptions. Taxpayers in the top quintile would see a 4.4 percent increase in after-tax income under the higher-rate assumption, or 8.7 percent under the lower-rate assumption.” There will also be a likely repeal of ObamaCare, which would mean the end of the net investment income tax. The seven tax brackets will be cut down to three, featuring 12%, 25%, and 33% rates.
According to Forbes, the Federal Estate Tax will leave us, but with caveats: “According to Trump’s proposal, it won’t be completely without tax. As it stands right now, his plan would tax the appreciation inherent in the assets of an estate valued in excess of $10 million, but only when the beneficiary sells the assets; meaning that the assets won’t be taxed immediately upon death.” There will also be tax cuts for businesses, cutting rates from 35% to 15%. Of the wealthy, Forbes also had this to say: “According to the Tax Policy Center, the totality of the Trump plan will reduce federal tax revenue by $6.2 trillion over the next ten years. Of those tax cuts, nearly 47% will go to the richest 1%. To put it into dollar terms, those earning less than $48,400 will experience an annual tax cut of less than $400, while those earning in excess of $700,000 will walk away with an average of an extra $215,000 per year.”
It is unclear how these changes will impact lower tax brackets, but there will be fewer personal exemptions for families and single filers. NPR shared a slightly different take: “Economists disagree on whether the tax plan would be good for the economy. The Tax Policy Center says that over the first decade, the government would lose $6.2 trillion in revenue, producing huge budget deficits that could hurt the economy.”
For better or worse, there are changes on the horizon. In the coming months, we at Paragon Trust Company and Fortress Fiduciary Company will be working hard to keep all our clients informed regarding these changes during the upcoming tax season, and beyond.
Tony De Angelo