Here are the latest key points from the Trump administration’s tax plan for 2018 and beyond. The administration’s goal is to get the plan enacted before 2018. Surely there will be some compromises before the final plan gets passed, if at all.
After reviewing the key points, I share my thoughts on how to win under this possibly new tax environment. The audio version is at the end of the post.
Republican Tax Plan Highlights
* No change to existing rules on 401k retirement accounts and the ability to contribute the current $18,000 into the accounts tax-free, and $18,500 for 2018 and beyond
* Lowers the deduction for mortgage interest for new home loans of $500,000 or less from the current $1,000,000 cap.
* Limits the deductibility of local property taxes to $10,000
* Eliminates the deduction for state income taxes
* Reduces the number of tax brackets from seven to four, with respective tax rates of 12 percent, 25 percent, 35 percent, and 39.6 percent.
* The plan sets a 25 percent tax rate starting at $90,000 for married couples, with a 35 percent rate kicking in at $260,000.
* The long-term capital gains and qualified dividend thresholds will remain as they are under the current system e.g. those in the bottom two tax brackets are eligible for 0% capital gains and dividend tax rates, those in the middle get a 15% tax rate, and those in the top pay a 20% tax rate.
* No repeal of the 3.8% Medicare surtax on net investment income over $200,000 per person.
* Individuals making over $500,000 and couples earning over $1 million may still pay 39.6 percent
* Reduce the corporate tax rate from 35 percent to 20 percent
* Repeal the estate tax completely e.g. remove taxes on inheritances over $5.49M per individual and $10.98M per couple
* Increase child tax credit from $1,000 to $1,600, though the $4,050 per child exemption would be repealed.
* Nearly double the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families