With Donald J. Trump all set to become the next US President, it is time for taxpayers to begin thinking about the tax code changes the new administration could bring about. The Trump led White House can substitute the present seven tax brackets imposed on ordinary income to three brackets. The present tax umbrella of 10 percent to about 39.6 percent could change to 12 percent and 25 percent. The highest could be 33 percent. Present personal exemption of $4,050 for every individual and his or her dependent along with the present standard deduction of $6,300 and $12,600 for single and married filers respectively can be changed to standard deduction of $15,000 and $30,000 for single and married filers respectively.
Comparing proposed Trump taxes with the present
Trump's proposed tax rates along with the new bigger standard deductions could affect a number of taxpayers under different categories. To give an example, a single tax filer earning about $75,000 as per current rules pays about $11,930. Under Trump proposals, it will be about $10,125- a reduction of $1,805. If the rules are applied to a single filer earning $120,000 then the present tax collection of $23,739 would be reduced to $21,375, thus saving the individual approximately $2,364.
For married filers earning about $100,000, income taxes under the present rule comes to $12,379. As per Trump rule, the tax would be lowered to $8,400- thus making handsome savings totting up to $3,979. For those married filers who earn in the region of $200,000, income taxes would be reduced to $32,750 from $38,323. The amount of money saved in such a case will be $5,573. Do note that the peak marginal tax rate as per the envisioned tax plan by Trump comes to 33 percent.
Elimination of taxes
President Trump can give the order to eliminate Net Investment Income Tax. This is an extra 2.3 percent of tax on the net investment income accrued from capital gains, interests and dividends. His administration can allow the over the line deduction for costs incurred in child care. These could be a maximum of the median cost of care in that particular state. A tax credit up to a total of $1,200 for expenses in child care can be enjoyed by families falling in the lower income bracket. There could also be the creation of savings accounts for the care of elderly parents of children. Trump could also finish the terrible Alternative Minimum Tax foisted on individuals.