News from the White House has financial speculators wondering just how President Donald Trump, and his administration, plan to change business taxes. As the short press release on the subject may be unclear, here’s what you need to know about the proposed business tax changes.
Business Tax Reform
Since the official press release announcing the Trump administration’s plan to reform the tax law and simplify it, there have been many articles written on the subject. To simplify and clarify the matter, the Trump administration proposed business tax cuts are:
- Cut for self-employed: 15 percent tax on pass-through businesses, which 95 percent of business in the U.S. are listed as.
- Corporation cuts: Corporate taxes to be cut to 15 percent as well, down from the federal 35 percent.
- Import and export changes: Trump has proposed that there be no border-adjustment tax, which will mean imports are taxed and exports will not be. However, the GOP isn’t quite on board with this proposal yet.
Tax Reforms That Could Affect Businesses
While these taxes may or may not affect your business, they have the capability to have fringe effects on some businesses.
- Overseas money: A one-time reparation tax rate will allow businesses to bring in overseas money with it being taxed at a lower rate. There are no hard numbers for this potential tax change.
- Estate tax: Also proposed is the elimination of the estate tax, so that all property can pass to inheritors with no taxation.
Individual Tax Changes Can Affect Business Taxes
Should changes occur and the pass-through business taxes get lowered, this can affect your individual taxes. Here are the individual tax changes that could affect your future filings.
- Double deduction: The Trump administration wants to double the standard deduction, which could save self-employed individuals a bundle when it come to tax time, as well as other people.
- Three income brackets: Currently there are 7 income brackets. The proposal is to change to 3 income brackets: 10 percent, 25 percent, and 35 percent. However, the incomes associated with the new brackets has not been clarified.
- Alternative minimum tax: A large change would be the repeal of the alternative minimum tax. Instead of making tax payers do their taxes twice (once with standard deduction and once with itemized) and having to take the highest tax rate, there would be no minimum tax that has to be paid.
Wait On Tax Plan-Based Changes
While it can be tempting to want to get ahead and anticipate the market, these changes are not set in stone yet. So before you go from considering restructuring your business to actually doing so, wait and see that these reforms get passed.
Then when the new tax laws are passed, they will likely have undergone revisions from the original proposal. We are here to help both now and when those changes come about.