The framework for tax reform released by Republican leaders contained a few positive factors for middle America. However, many of the changes could potentially harm low-income and middle-class taxpayers.
It is crucial that you meet with your Michigan estate planning lawyer and an experienced accountant that can help you determine the best ways to protect your assets. Our attorneys work with financial professionals to determine the best steps for securing your estate so you can provide for yourself and your family in the future.
Below are several key changes outlined in an article published online by Wealth Management that might impact your financial situation and your plans for the future.
Some Key Provisions of The Trump Plan
It is important to understand how the Trump Plan will impact your life.
Individual Tax Payers
According to the article, some individuals may be impacted by a few key provisions of the Republican tax reform plan that is related to individual income tax. Under the terms of the proposed tax reform:
- There will be only three tax brackets instead of seven. However, the details of those tax brackets, including the income levels included in each bracket are not known at this time.
- A fourth tax bracket may be created for wealthy individuals.
- The lowest tax bracket could see a 10 percent increase in the tax rate. However, lawmakers state that the standard and married deductions for filers will also increase.
- Eliminate popular credits and deductions used by many people including, deductions for state and local taxes. However, other deductions and credits such as the charitable contribution deduction, mortgage insurance deduction, and the child tax credit may increase giving a bigger break to individuals using these deductions and credits.
- The new tax plan repeals the alternative minimum tax. The repeal of this tax impacts mostly wealthy individuals because, during 2015, almost all the alternative minimum tax was paid by people who had in excess of $250,000 in income.
- Under the plan, Estate and GST tax (death taxes) will also be repealed. It is unknown how the repeal will impact the stepped-up basis at death which is an extremely valuable tax benefit for estate beneficiaries.
Because there may be other significant impacts for your individual income taxes and assets, we strongly urge you to consult with our Michigan estate planning lawyers to discuss the best ways to plan for retirement while protecting your assets for future generations.
Business Tax Payers
Many of the proposed changes in business taxes help corporate America.
- The tax plan includes a 20 percent corporate tax rate and the repeal of the corporate alternative minimum tax.
- Some lawmakers want a provision included that would stop the double taxation of corporate earnings by adding a 100-percent dividend paid deduction.
- Changes to the pass-through tax rates to tax the business income of businesses defined as “small” or “family owned” at 25 percent. However, there is no mention of taxing income of private equity funds and investment hedge funds at this rate.
- Many of the business deductions, credits, and industry-specific tax incentive Trump promised to eliminate in his campaign will be eliminated under the plan. However, the low-income housing credit and research & development deduction will remain.
- Business would be allowed to immediately claim an expense in depreciable assets instead of spreading out the deduction on the depreciated value over the life of the item.
As with the changes in individual taxes, we strongly urge you to speak with an attorney and a tax professional to determine the best options for protecting your business and yourself.
What Does This Mean for You?
Many issues must be addressed if the new tax reform passes. For example, you might get rid of a federal estate tax; however, leaving the gift tax in place can mean you need the assistance our attorney to ensure you do not do anything that can harm your further and your family’s future retirement plans an inheritance.
It means you need the assistance of an experienced Michigan estate planning attorney. The Elder Care Firm of Christopher J. Berry, CELA understands the proposed changes to the tax law and how those changes will impact estate planning and retirement planning in Michigan.
For more information or to schedule an appointment with a Michigan estate planning attorney, call our office at 888-390-4360 or use the contact form on our website.
Source:
“Trump’s Tax Plan Explained.” N. Todd Angkatavanich, Eric Fischer, James R. Brockway. Wealth Management. September 29, 2017.