0. President Trump: What Does It Mean for Taxes?
Scott Davis, CPA, Partner

1. Trump could cut taxes by $5.9T over the next ten years.
What’s Coming?
Trump could cut taxes by $5.9T over the next ten years.

2. If Taxable Income Is Between
Current Law
If Taxable Income Is Between
The Tax Due Is
0 - $9.275
10% of taxable income
$9,276 - $37,650
$ % of the amount over $9,275
$37,651 - $91,150
$5, % of the amount over $37,650
$91,151 - $190,150
$18, % of the amount over $91,150
$190,151 + $413,350
$46, % of the amount over $190,150
$413,351 - $415,050
$119, % of the amount over $413,350
$415,051 +
$120, % of the amount over $

3. Current Law
Rates on long-term capital gains and qualified dividends: 0%, 15%, 20% (AGI over $415,000)
Additional 3.8% tax on “net investment income”
Pease phase-out of itemized deductions once AGI exceeds $300,000 ($250,000 if single); adds 1.2% to top tax rate
Thus, the true top rate is as high as 44.6% (39.6% + 3.8% + 1.2%).

4. Current Law Standard Deduction: $12,6000 for MFJ ($6,300 single)
Personal Exemptions: $4,050 per person
AMT: Second, parallel system of tax computation

5. Current Law Corporate rate: 35%
S Corp/partnership owners pay tax at individual rates, meaning they can pay tax on business income at 44.6% instead of 35% corporate rate
International System: “deferral,” no tax on income earned through foreign affiliates until repatriated to U.S. Currently $2.4T of earnings stashed overseas

6. Current Law Estate Tax: $5.45M estate tax exemption
40% top estate tax rate

7. Ordinary Income Tax Rates
Under Trump
Issue
Trump
Ordinary Income Tax Rates
 12%, 25%, 33%
Trump would repeal Obamacare, and his top rate of 33% would apply to all taxpayers with income > $225,000 ($112,500 if single).

8. Top Rate on Capital Gains
Under Trump
Issue
Trump
Top Rate on Capital Gains
 20%
Under Trump’s plan, taxpayers with taxable income < $75,000 ($37,500 if single) will pay tax at 0%, taxpayers with taxable income > $75,000 but < $225,000 ($112,500 if single) will pay tax at 15%, and the rest pay at the top rate of 20%.

9. Absolute cap: see below
Under Trump
Issue
Trump
Itemized Deductions
Absolute cap: see below
Trump would cap itemized deductions at $200,000 (for married, $100,000 if single). It’s not clear if mortgage interest and charitable contributions would be subject to the cap.

10. Under Trump Issue Trump
Standard Deductions/Personal Exemption
Standard: $30,000 MFJ, $15,000 single; eliminate personal exemptions
According to a recent NYU study, the combination of the 12% bottom rate (in place of 10%) and lost personal exemptions will raise taxes on 8M low-income taxpayers .

11. Alternative Minimum Tax
Under Trump
Issue
Trump
Alternative Minimum Tax
Repeals AMT
The Buffet Rule would ensure that all taxpayers with income > $1M pay a minimum effective tax rate of 30%.

12. Under Trump Issue Trump Estate Tax Rate 0% Estate Tax Exemption N/A
Note: Trump would tax all appreciation in a decedent’s assets at capital gains rates, subject to a $10M exception.

13. Rate on Flow-trough business Income
Under Trump
Issue
Trump
Notes
Corporate Tax Rate
15%
The top corporate rate is currently 35%.
Corporate deductions
Trump: Would allow manufacturers to choose between immediate expensing of asset acquisition costs or deducting interest expense. Eliminates all credits except R&D.
Rate on Flow-trough business Income
Max of 15%
This is the big unanswered question with the new Trump plan! The website hints that he has dropped this plan, but the campaign suggests that he is keeping it. The difference is meaningful: $1.5T in tax revenue over 10 years.

14. Under Trump Issue Trump
International Tax: repatriation
Deemed repatriation of $2.5T of overseas profits at one-time 10% tax, payable over 10 years.
International Tax: new system
Worldwide: tax foreign affiliates on income immediately

15. Under Trump Issue Trump
Child Benefits
Keeps the child care credit, keeps the child tax credit, allows a deduction from AGI for child care expenses not counted in the child care credit ( if income < $500,000 married, $250,000 single).

16. Section 385 of the U.S. Internal Revenue Code
Under Trump
Issue
Trump
Section 385 of the U.S. Internal Revenue Code
Recently passed final regulations which allows the IRS to reclassify debt to equity for tax purposes which could result in taxable income  to  individuals,  including foreign shareholders, maybe revoked by the incoming administration.  There is discussion that this new sets of legislation were overly broad affected ordinary business transactions that lacked tax substance.

17. Section 385 of the U.S. Internal Revenue Code
Under Trump
Issue
Trump
Section 385 of the U.S. Internal Revenue Code
If Trump is successful at reducing the US Corporate Tax Rate to 15% would that give enough incentives not to escape from the US as this rate is below countries which now lower than the current US rate.

18. Section 385 of the U.S. Internal Revenue Code
Under Trump
Issue
Trump
Section 385 of the U.S. Internal Revenue Code
20 January, 2017, depending on what is said - What do you tell your client base?

19. Section 385 of the U.S. Internal Revenue Code
Under Trump
Issue
Trump
Section 385 of the U.S. Internal Revenue Code
If Trump is successful at reducing the US Corporate Tax Rate to 15% would that give enough incentives not to escape from the US as this rate is below countries which now lower than the current US rate.

20. What Does It Really Mean: In the Context of the Howard Stern Universe
Character
Income Level
Trump Tax Plan Increase/(Decrease)
High-Pitch Erik
<$23,099
($128)
Joey Boots
>$23,099 < $45,153
($969)
JD Harmeyer
>$45,153 < $80,160
($2,732)
Richard Christie
>$80,160 < $142,601
($5,369)
Jason Kaplan
>$142,601 < $209,113
($7,731)
John Hein
>$209,113 < $295,796
($11,476)
Baby Booey
>$295,796 < $732,323
($27,657)
Robin
>$732,323 > $3,769,396
($275,257)
Howard
> $3,769,396
($1,302,887)

21. Thank You! Questions? Scott Davis, CPA International Tax Partner
Withum