I recently attended a Year-end tax seminar put on by Kreischer Miller, an independent accounting firm in Horsham. While some would rather endure a form of torture than attend a tax conference, I was looking forward to hearing about how a CPA firm is evaluating potential tax changes under the Trump administration. I thought I’d share a few of my major takeaways from the conference, which are below.
We’ll be keeping a close eye on these items, so we may be reaching out as we determine the impact of these changes on client accounts. Please feel free to reach out to me if you would like to discuss.
- Semi-Interesting Fact: In 2015, households with more than $200,000 in income earned 29.5% of all income, but paid 71.8% of all federal income taxes. (Source: The Tax Foundation).
- Tax Proposals: There are two main tax proposals being presented by the GOP. Donald Trump presented the outline of a plan in September 2016, and the House Republicans presented their “Blueprint” in June 2016. Both are very similar.
- Proposed Brackets: Both proposals have 3 brackets (currently 7), with the top tax bracket being 33%.
- Other changes: Some other proposed changes that could have an impact on most taxpayers:
These changes would simplify the filing process. In addition, both proposals eliminate almost all itemized deductions except for the mortgage interest deduction and charitable deduction.
- Estate taxes: Both Trump and the House Republicans have expressed interest in eliminating the federal estate and gift tax. There may be a trade off, as many believe the step-up in basis at death could be in jeopardy. The step-up, which is the readjustment of an asset’s tax basis to fair market value upon inheritance, benefits many more people than eliminating the estate tax altogether.
- Semi-Interesting Fact: Tax bill H.R. 5946 was passed on 10/7/16, eliminating the tax on medals and other prizes awarded to Olympic athletes, assuming their adjusted gross income does not exceed $1 million (sorry Michael Phelps). Previously, all U.S. athletes that medaled in the Olympics had to claim the medals as income. The approximate value of medals:
- Gold – $25,000
- Silver – $15,000
- Bronze – $5,000