President elect Trump’s proposals:
Combining and lowering tax rates to 12%/25%/33% from the current rates that max out at 39.6%
Keeping the current capital gains tax structure
Taxation of carried interest as ordinary income
Repeal of the 3.8% tax on investment income
Raising the standard deduction to $30,000 for joint filers, $15,000 for single filers
Repeal of the alternative minimum tax (AMT)
Elimination of the personal exemptions
Elimination of the head of household tax filing status
Itemized deductions to be capped at $200,000 for married filing joint and $100,000 for single filers
Many of these items are also included in the Congressional “A Better Way” plan. Items that are included in both, such as the combining and lowering tax rates, elimination of the AMT, and trading off a larger standard deduction for other family tax benefits currently in the code, are likely points of agreement. Other items, such as limiting deductions, are included in both the Trump plan and the Congressional plan, but using different approaches.
The combination of both plans would lead to a lower overall tax rate, but applied over a larger base of income. Itemized deductions will continue to be worth less, so taxpayers relying on a lot of deductions to keep their tax rate down will have their tax burden go up. Those who are already limited in their use of deductions will have their tax burden go down. The value of strategies that defer income assuming that tax rates will be higher in the future will continue to be of uncertain benefit.