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Southfield, Mich.—April 27, 2017—The CPAs and tax advisors at Clayton & McKervey, an international certified public accounting and business advisory firm located in metro Detroit, see major changes ahead for businesses and individuals should President Trump’s proposed tax overhaul become law.
The largest and most immediate perceived impact on businesses would be the drop in the highest marginal corporate tax rate from 35% to 15%, while the top marginal tax rate for individuals is proposed at 35%, down from the current 39.6%.
“For individual business owners, the tax drops could be a significant windfall,” Margaret Amsden, CPA, a shareholder in the tax department at Clayton & McKervey said. “The tax rate on business income reported on tax returns of individuals in pass-through businesses organized as LLCs or Sub-S corporations would drop to 15% rather than being taxed at individual rates. It is not yet clear how the changes to deductions and the closing of ‘loop-holes’ will impact the overall tax burden.”
The President’s plan to repeal the provision of the tax code allowing individuals to deduct state and local income and real estate taxes from their income is expected to have a measurable effect on those who have historically itemized deductions. To offset this in some part, the President’s plan calls for a doubling of the standard deduction.
Individuals in general are expected to see tax changes in the following areas:
- A drop from seven tax brackets to three: 10%, 25%, 35%
- Double standard deduction for married filers $24,000
- Repeal of AMT
- Repeal of the 3.8% investment tax
- Repeal of the estate tax
- Only charitable deductions and home interest itemized deductions will remain
Back to the proposed business changes, there is an intention to move to a Territorial Tax System, a system that would only tax profits earned in the United States versus the current system that taxes worldwide income. The proposal also provides a one-time lower tax rate on the repatriation of overseas earnings. It should be noted, however, that no specifics have been revealed for either of these concepts yet.
“Many multi-national businesses have accumulated significant earnings overseas. The repatriation proposal would allow companies to bring these overseas earnings back to the United States at a lower tax rate. This proposal is meant to stimulate growth in the U.S. economy,” Sarah Russell, CPA, a shareholder in international tax at Clayton & McKervey, said.
About Clayton & McKervey
Clayton & McKervey is a full-service CPA firm helping middle-market entrepreneurial companies compete in the global marketplace. The firm is headquartered in metro Detroit and services clients throughout the world. To learn more, visit claytonmckervey.com.