By Amye Anderson
UCBJ Managing Editor
UPPER CUMBERLAND – Earlier this week, a nine-page tax plan, aimed at making several significant changes to the nation’s current tax plan system, was unveiled by President Donald Trump and his team of top Republican tax advisors.
Although the proposed plan’s particulars are still being hashed out, and there are still many questions left unanswered, the additional plan details released Wednesday help provide a glimpse of what taxpayers could expect come tax time, if the plan is approved.
Below are some highlights of how the proposed plan could impact individuals and families:
- The Zero Tax bracket – In short, the plan would nearly double the standard deduction to $24,000 for married taxpayers filing jointly, and $12,000 for those filing alone. Taxes would be eliminated on the first $24,000 of income earned by a married couple and the first $12,000 earned by an individual.
- Less tax brackets – Currently, taxable income falls within one of seven federal income tax brackets. The new plan would consolidate those into three brackets – 12 percent, 25 percent, and 35 percent – with the goal of providing those families in the existing 10-percent bracket with increased standard deductions and child tax credits.
- The personal exemptions for dependents would be repealed and the Child Tax Credit would increase under the plan. The first $1,000 of the credit would be refundable as under current law. The plan would also increase the income levels at which the Child Tax Credit would begin to phase out; making the credit available to more middle-income families and eliminating the marriage penalty in the existing credit.
- Death- and generation-skipping transfer taxes would both be would be repealed along with the Individual Alternative Minimum Tax (AMT).
- Most itemized deductions would be nixed but tax incentives for home mortgage interest and charitable contributions would remain and tax benefits that “encourage work, higher education, and retirement security” would stay.
Business owners and industry leaders would also see changes under the proposed plan:
- The minimum tax rate applied to the business income of small and family-owned businesses would be limited to 25 percent and the corporate tax rate would be slashed to 20 percent.
- Businesses would be allowed to immediately write off the cost of new investments for at least five years.
- A one-time, low tax rate would be imposed on wealth that has already been accumulated overseas; with the intent on cutting the tax incentive for keeping the money offshore.
A Senate budget proposal released Friday lists a Nov. 13 deadline for a tax reform draft bill.
The current tax code was last updated by President Ronald Reagan in 1986.