In an announcement last week, the White House proposed individual and business tax reform. The Trump Administration provided very broad outlines and few specifics.

The proposed individual tax provisions include:

  • Three tax rates – 10%, 25%, and a top rate of 35%. Down from the current seven tax rates, with a top rate of 39.6%.
  • Repeal of the 3.8% tax on net investment income.
  • Elimination of itemized deductions other than charitable contributions and mortgage interest.
  • Repeal of the Alternative Minimum Tax (AMT).
  • Elimination of the Estate Tax.
  • Doubling of the standard deduction for individual and married couples.
  • Unspecified tax relief for families with child and dependent care expenses.

The proposed business tax provisions include:

  • Reducing the top corporate tax rate to 15%. The current top tax rate is 35%.
  • Applying the 15% tax rate to business income of pass-through entities such as partnerships, S corporations, and limited liability companies. Administration officials have stated that this provision will contain measures to prevent business owners from converting their compensation income into lower-taxed business income.
  • Implementation of a territorial tax system in place of the current worldwide tax regime.
  • A one-time tax on business profits in foreign countries repatriated to the United States at an unspecified tax rate.

Please take this opportunity to initiate a conversation with your BPM Tax Advisor regarding your tax goals and objectives. As tax reform legislation becomes more focused, having a good understanding of your plans for the near term and the longer term will allow us to provide you with more proactive tax planning.

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