CWA Managing Partner Dan Wicker gives an update on the Tax Reform Outline and the effect changes may have on individuals and business.
Last November after the election of Donald Trump, CWA prepared an analysis of the Trump Tax Plan from his proposals while campaigning. Now, a little over 3 months into his presidency, the White House has unveiled a broad tax cut plan to both individuals and businesses. There have been multiple outlets trying to analyze how this will affect taxpayers, and in reality the answer is: nobody knows. We feel it necessary to at least communicate with you our early thoughts.
The White House proposal is just that, a proposal. Additionally, the proposal is so broad there is no detail on any of the proposed changes other than a couple of sentences on what the White House would like to change.
At CWA, our financial leaders are reading and following all proposals, legislation and analysis that could impact our clients. We will give a complete analysis of any proposed plan when there are actual tax changes sent to Congress with a full write-up. It is far too early to provide any detailed analysis of how a plan in this very early stage may affect taxpayers until more serious action for seeking approval is taken.
Until that time, here is a list of high-level changes that could potentially have an impact to CWA clients should the plan comes to fruition:
1. The current seven tax brackets will collapse into three brackets with 35% being the highest individual.
2. The current capital gains bracket will remain unchanged with some taxpayers paying 15% and some paying 20%.
3. The 3.8% Affordable Care Act (ACA) tax on investment income will be repealed.
4. The alternative minimum tax (AMT) will be repealed.
5. Itemized deductions will be eliminated except for mortgage interest and charitable contributions.
6. Corporate tax rates will be lowered from 35% to 15%, and may include income of pass-through entities.
7. The estate tax will be repealed.
While some of these have positive effects on CWA clients, there appears to also be potential for increased taxes due to the loss of itemized deductions. However, we feel it is much too early to take action on any of the proposals.
The CWA leadership team will continue monitoring the legal landscape to keep our clients and planning team up-to-date on any further proposals or changes that could impact our 2017 tax plans. As of now, there is no change related to the proposed Trump Tax Plan to any tax planning for 2017. The one thing we do know is that what may go to Congress will probably be different than rough proposals currently outlined.