Yesterday President Trump revealed plans to significantly cut the tax rates for both individuals and businesses. There are few details of how and when these changes will be made but below are the headlines of what to expect. The focus of these changes is to cut the US individual and business tax rates and also to simplify the US tax code.
- The number of individual income tax brackets will be reduced from seven (ranging between 10% and 39.6%) to just three brackets of 10%, 25% and 35%. There is currently in information on the income ranges for each bracket.
- The standard deduction will be almost doubled. A married couple can currently claim a standard deduction of $12,600. The proposals will provide a standard deduction of $24,000.
- However, the proposal would scrap some itemized deductions such as those for state and local taxes. Itemized deductions for mortgage interest, charitable contributions and retirement savings will remain in place.
- Both Alternative Minimum Tax (AMT) and Estate Tax will be repealed.
- The top capital gains rate and dividend rate is returned to 20%
- Net investment income tax (3.8%) will be repealed.
- The tax rate on businesses will be reduced to 15% from 35%.
- A one-time tax on money currently held by companies overseas would be accompanied by a new method of only taxing companies on income generated in the United States. The rates for this are currently unknown.
- Pass through entities (partnerships, S-Corps etc) which usually have their income taxed on the owners individual returns, will also have access to the lower 15% business income tax rates.
When more details are made available on how and when these changes will be made we will provide further updates.
We are experts in handling the implications of dual taxation in the UK and the US. If you are an American living in the UK and require any assistance with your tax affairs please do not hesitate to contact us.