With the year-end rapidly approaching, you may have questions regarding how a Donald Trump presidential administration paired with a Republican-dominated Congress might impact your taxes for 2016 and beyond. Tax situations are different for everyone but a common thought process for the near future is to defer ordinary income to 2017 and accelerate deductions to 2016 when feasible and practical. In a very broad summary, here are some of the tax change proposals by either President-elect Trump and/or the GOP:
Individuals may expect these changes:
- Lower and consolidated tax rates
- Increased standard deductions but elimination of personal exemptions
- Limitation on the maximum amount allowable for itemized deductions
- Repeal of the estate tax (with a possible limit on the amount permitted to be "stepped up at death” for purposes of computing gain or loss for income tax purposes)
- Elimination of the alternative minimum tax
- Repeal of the net investment income tax
Businesses may expect these changes:
- Lower corporate business tax rate
- Elimination of the alternative minimum tax
- Increased expensing of tangible assets
- Immediate deductions for manufacturing investments (in lieu of interest expense deductions)
- Immediate expensing of intangible assets
- Revision of the net operating loss carryback and carryover regulations
- Fixed tax rates for income and distributions for S corporations and partnerships
Based on the information available to us now and to the extent it is possible, deferring ordinary income to 2017 and accelerating deductions to 2016 appears to be an appropriate approach. For example, if there are charitable intentions you are considering for 2017 or an outstanding charitable pledge, it might make sense to fulfill that obligation in 2016. Because everyone’s tax situation is unique, if you are interested in doing any tax planning or would like more detail regarding President-elect Trump and/or the GOP’s positions on tax reform, please contact our office to discuss your specific tax planning needs and objectives.
