Proposed Changes Could Impact How You File Your Taxes
Oct. 11, 2017 Article

Proposed Changes Could Impact How You File Your Taxes

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President Trump has recently begun an ambitious campaign to cut taxes for individuals and businesses through what many are calling the most sweeping changes to the federal tax code in decades. We sat down with Scott Voss, CPA, managing partner of Mariner’s tax services division, to learn more about the proposed changes and their potential impact on individuals. 

Q: What specific changes is the Trump administration proposing?

A: One major change is the consolidation of seven tax brackets into three, at 12 percent, 25 percent and 35 percent. As of now, there is no indication of the specific income levels these three brackets would represent. In addition, it is possible for the addition of another top rate for the highest income tax payers. 

There is no mention of a change to capital gains taxes. What is mentioned, however, is a standard deduction increase to $12,000/$24,000 for single/married filing jointly, up from today’s rate of $6,350/$12,700. 

Additional changes include:

  • Itemized deductions
    • No change to charitable or mortgage interest
    • The potential elimination of most other deductions
  • Dependents
    • Repeal personal exemption
    • Significantly increase child tax credit
    • A non-refundable credit for non-child dependents
  • Repeal of the Alternative Minimum Tax (AMT)
  • Work, education and retirement
    • Retain tax benefits that encourage these items
    • Simplify to improve efficiency and effectiveness
    • Maintain or raise retirement plan participation and resources available
    • No specific details related to these changes are provided at this time
  • Repeal of the estate and generation-skipping transfer tax

Q: What does the Trump administration hope to accomplish with such sweeping changes?

A: With these changes, Trump is hoping to:

  • Make the tax code simple, fair and easy to understand
  • Give American workers a pay raise by allowing them to keep more of their hard-earned paychecks
  • Make America the jobs magnet of the world by leveling the playing field for American businesses and workers
  • Bring back trillions of dollars that are currently kept offshore to reinvest in the American economy

Q: What are the specific goals of the proposed changes?

A:

  • Tax relief for middle-class families
  • The simplicity of a “postcard” tax filing for the vast majority of Americans
  • Tax relief for businesses, especially small businesses
  • Ending incentives to ship jobs, capital and tax revenue overseas
  • Broadening the tax base and providing greater fairness for all Americans by closing special interest tax breaks and loopholes

Q: What are you advising clients going forward?

A: At this point, it’s difficult to draw conclusions or make specific recommendations. If Trump is successful in pushing through these changes, most people will be in a lower tax bracket under the updated laws. If this is the case, taxpayers may consider deferring income, if possible, until the lower tax brackets have been implemented. The opposite is true with regard to deductions.

Should taxes decrease, your charitable (and other) deductions may provide less tax benefit in the future. Accelerating deductions now and deferring your income for future years may reduce your tax bill over multiple tax years.

Because itemized deductions may be limited in the future, taxpayers may also consider whether using the standard deduction versus itemizing their deductions would be most appropriate for them. If you are in a situation where you are not able to take all of your itemized deductions due to the new limitations, you may want to explore potential strategies to maximize the value of your deduction. Your wealth advisor can provide additional guidance related to your specific situation.

This commentary is limited to the dissemination of general information pertaining to Mariner Wealth Advisor’s investment advisory services and general economic market conditions. The information contained herein is not intended to be personal legal, investment or tax advice or a solicitation to buy or sell any security or engage in a particular investment strategy. Nothing herein should be relied upon as such. The views expressed are for commentary purposes only and do not take into account any individual personal, financial, or tax considerations. There is no guarantee that any claims made will come to pass. Opinions are based on information and sources of information deemed to be reliable.

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