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With the recent presidential election, individuals can possibly expect a change in their taxes. Throughout Donald Trump’s campaign, presidential elect has proposed tax cuts through the Middle Class Tax Relief and Simplification Act, that taxpayers would likely to see during his term in office.
Currently, there are seven tax rates, which includes tax rates of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Trump’s tax plan proposes to reduce these tax rates to include only three tax rates to include 12%, 25%, and 33%. This means that taxpayers can expect to pay less in taxes. While most will see tax cuts, those who earn higher levels of income will of course save the most. Those who earn low income will see little changes or no changes depending on their tax situation.
You can also expect to see a major reduction in business taxes. Under Trump’s current proposal, he is also proposing reducing business taxes to 15% of profits.This is a big tax reduction. Keep in mind, the highest income tax bracket for corporations are taxed at 35% (with exceptions), so this will be a tax savings for corporations.
Changes to those who itemized
The current tax law allows for a taxpayer to take a deduction by either utilizing the standard deduction or itemizing deductions. Generally, taxpayers will take the highest deduction of the two. Those who itemize are those who have paid expenses such as mortgage interest, taxes, charitable gifts throughout the year.
The current standard deduction for single persons are $6,200 and $12,400 for married persons. Trump’s plan proposes to increase the standard deduction to $15,000 for single persons and $30,000 for married persons. But keep in mind, the proposal plans to do away with personal exemptions. Currently, a person is able to take a personal or dependency exemption of $4,050 (2016) for themselves and their spouse. In addition, for each dependent claimed, an additional $4,050 is available for each. As a result, while some may benefit by no longer needing to elect to itemize, those who have a larger households may not benefit from the tax changes.
Repeal of certain taxes
Finally, Trump also proposes to repeal the estate tax. Under the current tax law, a taxpayer does not have to pay estate taxes if he or she dies with an estate of less than a little more than 5.49 million, this number doubles for married couples. Trump proposes no estate taxes for those who die with a taxable estate.
Remember: your choice, your future!