Trump tax changes - by John Varella

John Varella, Lourie & Cutler

President Donald Trump and the Republican leaders of Congress have made tax reform a priority. What could those tax changes look like? We can’t be certain yet, but here are some of the proposals that candidate Trump made.

With regard to individual income taxes, he proposed a reduction in the top individual tax rate from 39.6% to 33%. While reducing the top rates, he also proposed eliminating the deductions for paid state and local taxes and capping itemized deductions at $100,000 for single taxpayers and $200,000 for married taxpayers. The standard deduction would be increased to $15,000 for single taxpayers and $30,000 for married taxpayers. In addition, the current Republican congressional proposal addressing the Affordable Care Act would eliminate the 3.8% tax on net investment income.

With regard to the estate tax, candidate Trump proposed repealing the current estate tax and replacing it with an income tax on the deemed sale of all capital assets held by a decedent that exceed $10 million at death. Though not entirely clear, it appears that his plan is to eliminate the gift tax as well.

With regard to corporate tax, he proposed reducing the rate to 15% from 35%. He would eliminate all corporate tax credits, except for the research credit. In addition, he would repeal all other corporate tax expenditure deductions. With regard to the over $3 trillion in untaxed foreign profits held oversees by U.S. companies, Trump would provide for a deemed repatriation of those profits at a one-time rate of 10% with the tax to be paid over a ten-year period.

Adopting a border adjustment tax is also a possibility. Under one of the proposed Congressional plans, imported products and services would be taxed by the U.S. when they are used or purchased in the U.S at a 20% rate. Profits on exported products and profits earned oversees would be exempt from this tax.

Will the proposals be adopted? Stay tuned.

John Varella is an attorney with Lourie & Cutler, Boston, Mass.