News — 10 months ago

Trump’s Tax Reform Plan

by infohub

Trump’s Tax Reform Plan

US President Donald Trump is all set to make drastic changes to the existing tax system in the United States. The current taxation rates see multiple tax brackets for individuals and corporates alike. The Congress, through President Trump’s new tax reform, hopes to make taxation more people-friendly by eliminating unnecessary and irrelevant technicalities and tax slabs.

Take a look at some of the proposed changes in the tax reforms put forth by President Trump and the Big Six team:

 taxes

Individual taxation

The current tax structure in the United States sees seven different tax brackets, all ranging from 10% to 39.6%. The new tax reforms seek to reduce the tax brackets from seven to three.

Individual’s taxes in the US are paid based on the income earned by the person. If you earn more, you pay more taxes and vice versa. This rule holds good in the new tax reforms too. The proposed slabs for the new taxation stand at:

Income Range

Tax (%)

$0 - $45,000

12%

$45,000 - $200,000

25%

$200,000 - $500,000

35%

$500,000 >

39.6% *

*The House is still unsure whether the fourth tax bracket will be created or not

When compared to the earlier tax percentages, two points become clear:

  • The wealthy and higher income group will see a tax cut of 4.6%
  • The lower income group will see a tax increase of 2%

The new tax reform seems to be leaning towards the wealthy, which certainly make things difficult for people who are earning less. But, there may still be a silver lining to look for.

As per the existing Income Tax rules, the standard deduction (the base non-taxable amount of an individual’s income) is set at $6,350. But, in the new reforms, the standard deductions are planned to be set at $12,000 which translates to more savings made in the long run.

The new tax reforms also favor families who are paying elderly care and childcare. Elderly care tax credit is set at $500 and the child care tax credit is as yet undefined.

 people search

Corporate taxation

President Trump’s tax reforms are looking to completely exempt businesses and corporates from paying taxes on overseas earnings. Additionally, any income currently being held in overseas accounts is set to be taxed at a fixed tax rate that is unspecified as of now.

Corporate income tax is also proposed to be lowered from 35% to 20%. Additionally, the Alternative Minimum Tax which places a higher tax slab on wealthy families and corporations is set to be repealed, allowing for greater savings.

 

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