Factors that compound the planning challenge this year include a new presidential administration that has promised to lower tax rates, eliminate the Affordable Care Act and the taxes associated with it, increase the standard deduction, capping the amount of itemized deductions, eliminate personal exemptions as well as potential other changes. In addition, we have Congress’s all too familiar failure to act on number of important tax breaks that has expired at the end of 2016.
The House Ways and Means Committee is currently working on legislation based upon the House GOP “Better Way” tax reform blueprint tat was released in June of 2016. The blueprint shares some similarities with proposals mentioned by President-elect Trump during his campaign. The GOP blueprint proposes lowering the corporate tax rates to 20 percent, along with implementing a new 25-percent tax rate on small businesses organized as pass-through entities or sole proprietorship. The GOP blueprint would also consolidate and reduce the individual income tax rates to 12,25 and 33 percent, among other changes from the current seven rates ranging from 10 to 39.6 percent. The Trump plan coincides with GOP plan on individual tax rates, will retain the existing capital gains rate structure (maximum rate of 20 percent) and lower the corporate business tax rate from 35 to 15 percent as well as permitting S corporation and partnership owners to be taxed on business income at the corporate rate of 15%. None of the above statements have been enacted by Congress, bu are proposals only.