Although there are no guarantees, following are several tax changes that Donald Trump promises. The financial impact will hit the middle class and small business owners the hardest.
Individual tax rates: Trump has said that wants to revamp the current seven-tier tax rate structure. Currently, the lowest tax rate is 10 percent, with a high of 39.6 percent. This setup would be replaced by a three-tier bracket structure of 12 percent, 25 percent and 33 percent.
Itemized deductions: Trump intends to curb most itemized deductions, but would allow certain exceptions, such as deductions for charitable donations and mortgage interest. Residents of states with high income tax rates could be hurt.
Alternative minimum tax: Congress has band-aided the alternative minimum tax (AMT) several times in recent years. Trump would make a clean break by repealing the AMT outright.
Child care expenses: Among other modifications, Trump would replace the existing child care credit with an above-the-line deduction available to both itemizers and non-itemizers, while creating tax-favored accounts for child care.
Corporate taxes: Trump has previously proposed slashing taxes for corporations. Notably, he would reduce the top corporate income tax rate of 35 percent to 15 percent – or less than half of the current top tax rate. If you own an LLC or SUB S Corp, you may want to switch to a regular C Corp.
We’ll have to wait and see.