As a follow up to our business suggestions, this post will focus on what individuals can do given the Trump tax plan. For starters, here is a summary of how the plan would change tax law for individuals and families.
Proposed Trump tax plan for individuals and families
The first proposed change is a reduction in the number of tax brackets, from seven to three. The new brackets would be 12%, 25% and 33%. The following picture from HowMuch.net does a phenomenal job showing this drastic change in tax brackets for individuals and joint filers.
Trump tax plan
Additionally, the standard deduction would significantly increase from the current $6,300 for singles and $12,600 for married filing jointly to $15,000 for singles and $30,000 for married filing jointly couples. However, personal exemptions would be eliminated, which are $4,050 for single filers and $8,100 for married filing jointly filers. If you’re curious about current deductions and tax brackets, please visit this IRS website link. Further changes would include the repeal of the Alternative Minimum Tax (AMT) and the Net Investment Income Tax (NIIT) for high income individuals and couples. And finally, itemized deductions would be capped at $100,000 for single filers and $200,000 for married filing jointly filers.
As a taxpayer, I’m wondering, what can I do to pay less tax? Here are some thoughts.
- Delay selling investments, especially if you are subject to the NIIT.
- Defer income through maximizing your 401k plan contributions and HSA contributions. This could help you slip into a lower tax bracket for this year and potentially avoid other taxes.
- Charitable contributions are great deductions. You can help a local non-profit and reap tax benefits. There are some limitations to charitable donations, so make sure you understand the rules.
If your CPA or accountant hasn’t contacted you to discuss how proposed tax changes may impact you, we invite you to schedule a free consultation to discuss if our proactive approach would benefit you.