Jul 13, 2017

Among the biggest economic change that Trump brought about, changes in the tax system was something that he had promised, while he was still campaigning to become president. Now that he’s gotten to the White House, he’s introduced new changes in the tax plans but not all of them appear to be as promising at first glance. The following are a few new laws for the everyday tax payer.

Fewer Tax Brackets

The current administration had 7 income brackets for individuals and family members that taxed incomes ranging from 10% to 43.4% of the total revenue in the following manner:

Single Filer – Taxable Income

Married/Joint Filer – Taxable Income

Tax Deductable

$0 - $9,275

$0 - $18,550

10%

$9,276 – $37,650

$18,551 – $75,300

15%

$37,651 – $91,150

$75,301 – $151,900

25%

$91,151 – $190,150

$151,901 – $231,450

28%

$190 ,151 – $413,350

$231,451 – $413,350

33%

$413,351 – $415,050

$413,351 – $466,950

35%

$415,051+

$466,950+

39.6% + 3.8% surtax

Under Trump’s new tax laws, the brackets have been deducted from 7 to only 3. Deductable tax on each of these brackets amounts to the following:

Single Filer – Taxable Income

Married/Joint Filer – Taxable Income

Tax Deductable

$0 - $37,500

$0 - $75,000

12%

$37,501 - $112,500

$75,001 -$225,000

25%

$112,500+

$225,000+

33%

While it may appear to be beneficial to those who fall in the second or third bracket, low income individuals who fall into the first bracket are going to have to pay a higher tax. Trump has also removed the head of household bracket and increased the standard deduction amount as well. This could entail higher tax bills, particularly for large, low income families as well as single parent families.

Removal of Estate Tax

Trump’s new tax laws remove taxation on real estate property that is passed on to one’s heirs. Currently, any property that exceeds the value of $5.45 million will be subject to property tax of 40%. Under Trump’s new plan, only the appreciation inherent of the property that is valued up till $10 million is considered tax deductable. This will also only happen if the beneficiary has chosen to sell the acquired asset which means that at the time of death, the assets that are being transferred will be completely free of tax.

Cuts in Business Taxes

Currently, businesses and corporations have to undergo a tax rate of 35% which Trump has proposed to drop down to 15% on all business income. This means that regardless of the kind of corporation, whether it is a partnership, a sole proprietorship, S corporation or even an individual contractor, the business will only have to pay 15% of the total tax. However, there is a bit of contention since Trump wants the tax amount to be around 15% while the Republican Party is pushing for 20%

These are among some of the more major, popular tax law changes that are being introduced. Keep an eye open though since these are only the early days and Trump has plenty of time to approve and announce all the changes he has promised to make.

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