For individuals :
- Individual tax rate brackets trimmed to three rates of 12, 25 and 35 percent, down from the current seven brackets.
- Nearly doubling the standard deduction, to $12,000 for individuals and $24,000 for joint filers.
- Eliminating all but two itemized deductions: home mortgage interest and charitable deductions.
- Eliminating personal exemptions for dependents, but increasing the Child Tax Credit.
- Repealing the estate tax.
- Repealing the Alternative Minimum Tax (AMT).
For businesses :
- Cutting the top corporate tax rate to 20 percent from 38 percent.
- Capping at 25 percent the tax rate for pass-through corporations including sole proprietorships, partnerships and S corporations (down from the current 39.6 percent max).
- Shifting international taxation to a territorial system, encouraging U.S. corporations to repatriate earnings from foreign subsidiaries.
- Allowing full expensing of business investments, rather than the standard depreciation model.
It’s not official yetPlease recall that much needs to occur before any tax reform proposal makes its way into law. There is sure to be much discussion over a few points, including:
- The current proposal does not account for how any federal revenue shortfall created by this reform will be addressed, nor how it will impact government spending.
- Many constituents will battle to retain their deductions. For example, being able to deduct state and local taxes on a federal return is very important for residents of high-tax states such as New York and California.
- With the elimination of so many deductions and the increase in the standard deduction, fewer taxpayers may decide to use itemized deductions if this reform is passed. This could impact the value of the home mortgage interest and charitable contribution deductions.
- Taxpayers in the lowest income bracket see their rate rise to 12 percent from 10 percent. The proposal authors say this will be offset by the higher standard deduction.