This morning, Donald J. Trump won the US Presidential Election.
I’m sure that one of the many questions that US citizens may ask is what will be the impact of the election on my tax bill.
Donald Trump’s main proposed tax plans for individuals are as follows:
- Change the current income tax brackets ranging from 10% to 39.6% to just three new brackets of 12%, 25% and 33%.
- Increase the standard deduction to $15,000 for single taxpayers and $30,000 for married taxpayers.
- Itemized deductions capped at $100,000 for single filers and $200,000 for joint filers.
- Tax qualified dividends and capital gains at a maximum rate of 20%
- Repeal Alternative Minimum Tax
- Tax Carried interest as ordinary business income. Carried interest is usually taxed as long term capital gain.
- Repeal federal estate and gift taxes.
- The 3.8% Net Investment Income Tax will be repealed.
While there is no current timeline as to when these changes will happen, it is clear that these will bring significant tax cuts for many Americans.
We will provide further update when there is further information on the new President’s tax reform plans.
The full benefit or indeed the cost of these changes may not be clear if you are paying taxes in UK, at rates which exceed the US tax rates. However, lower US tax rates will inevitably make certain UK tax planning more valuable going forward. For example, in order to reduce excess foreign tax credits from accumulating.
If you would like to discuss your personal tax position in more detail please contact us.