|The President’s recently released tax reform plan as detailed below is similar to the proposals made on the campaign trail.
For business taxpayers:
- The top tax rate for all businesses including Partnerships and S Corporations (pass-through businesses) would be slashed to 15%. The current top tax rate is 35% for corporations and 39.6% for pass-through businesses.
- Upon cash distributions from pass-through entities, a second layer of tax might be imposed similar to dividends now taxed to C corporation shareholders.
For Individual taxpayers:
- The current seven individual income tax rates of 10%, 15%, 25%, 28%, 33%, 35% and 39.6% would be reduced to three: 10%, 25%, and 35%.
- The standard deduction would be doubled from the current amounts.
- All itemized tax deductions would be eliminated except for mortgage interest and charitable contributions.
- The 3.8% net investment income tax would be eliminated.
- The federal estate tax (currently taxed at 40% rate for estates above the $5,490,000 exclusion) would be repealed.
- The alternative minimum tax would be repealed.
- The plan calls for a one-time repatriation tax on offshore earnings.
- The plan calls for a shift from a worldwide system of taxation to a territorial system. Today, U.S. companies generally must pay tax on their worldwide income, regardless of where income was earned. Under territorial system, income would be taxed in the country where it is earned.
While many details must be negotiated, Treasury Secretary Steven Mnuchin, on behalf of the Trump Administration, stated that they were determined to get this tax reform plan done this year.
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