Proposed Income Tax Changes - Part I

President-elect Trump campaigned on lowering tax rates as part of his plan to spur economic and job growth. There are a lot of details to his plan, which are far more extensive than what can be covered in a single article. Below is a summary of some the essential changes.

Tax Rates for Married-Filing Jointly taxpayers

• 12% for income less than $75,000
• 25% for income $75,001 - $225,000
• 33% for income over 225,000

The brackets for single taxpayers will be 50% of the above amounts and the head-of-household status will be eliminated. An unmarried person who has a qualified dependent (e.g., single parent with child) is an example of a head-of-household taxpayer.

The current preferential rate of 20% for long-term capital gains will be maintained using the above tax brackets. The 0.9% Medicare surtax on wages in excess of $250,000 and the 3.8% Medicare tax will be eliminated, assuming the Affordable Care Act is repealed.

For corporate taxpayers, the rate will decrease from 35% to a flat 15%. 

It's estimated that U.S. multi-national companies (e.g., Apple, Microsoft and General Electric) have more than $3 trillion of earnings attributable to non-U.S. sales that have not been subject to U.S. taxation. There will be a one-time 10% tax assessed for the deemed repatriation of foreign earnings by U.S. corporations. This is an incentive for U.S. companies to bring the money back to the U.S., which is intended to spur economic growth through business expansion, acquisitions and buying back company stock.

It's difficult to predict which, if any, of the above provisions will enacted, but these changes form the foundation of President-elect Trump's tax plan.