How your personal and professional financial may be affected by the current administration’s stated goals for changes to the tax code.
Lowered Corporate Taxes
The United States has one of the highest corporate tax rates in the world. As one of the core financial promises offered by the President, lowered corporate taxes are likely to be one of the first changes that taxpayers will see. This change will ideally allow businesses to create new job opportunities, further stimulating economic growth.
Closure of the Carried Interest Loophole
The carried interest loophole allows professionals who manage private equity funds to treat their earnings as long-term capital gains. Without having to claim these earnings as ordinary income, equity fund managers reduce the amount of tax they pay by at least 50%. The closure of this loophole has bipartisan support, making it likely to succeed. This change will make it necessary for such individuals to pay a greater portion of their income to tax.
Fewer Individual Tax Brackets
There are currently seven tax brackets that individuals fall in to depending on their income and physical and liquid assets. The current administration has made it clear they hope to reduce the complexity of income taxes and reduce the number of tax brackets three. While this will effectively make filing taxes easier, the reduced number of available brackets means that middle-income households will have to pay more during tax season. Those facing this increased tax liability may need to begin investing in planning services to remain financially stable.
This simplification may also lead to the closure of the credit for serving as the head of a household.
These are only some of the changes to tax legislation that could be enacted in the near future.