Six Tax Planning Strategies To Prepare For A Trump Presidency
Published: 11/21/2016 10:07:33 PM
Defer your income until 2017, but be wary of your income levels in both years.
It’s always advantageous to push any income you can from one year into the next; after all, there is a time value to taxes you can pay next year instead of now. This year, however, the concept of deferral is even more meaningful. For 2017, the top rate on ordinary income — things like wages, interest income, and business income — is 39.6%. Should President-elect Trump’s proposal become law, however, the top rate on ordinary income in 2017 would drop to 33%. Thus, deferring a year-end bonus from 2017 until 2018 would save you nearly 7% in tax if you’re in the highest bracket.
If you earn between $127,500 and $425,400 (if single) or between $255,000 and $487,650 (if married filing jointly), sell your investments before 2017
Based on Trump's proposal, there is a group of taxpayers who under current law pay 15% on their gains, but who under the Trump plan would pay 20%. It works like so: under current law, the 20% top rate doesn’t kick in until you earn more than $425,400 (if single, or $487,650, if married filing jointly. Under Trump’s tax plan, however, all taxpayers in his top tax bracket would pay a 20% rate on capital gains, and as of this writing, his top bracket begins at $127,500 (if single, $255,000 if married filing jointly).
If you are an employee and earn more than $52,500 (if single) or more than $105,000 (if married filing jointly), tender your resignation today.
If you earn a salary, you pay tax on those wages at “ordinary income tax rates.” Under the Trump plan, those rates will be as follows:
| Income Level | Single | Income Level | Married Filing Jointly |
| $0-$15,000 | 0% | $0 – $30,000 | 0% |
| $15,000-$52,500 | 12% | $30,000-$105,000 | 12% |
| $52,500-$127,500 | 25% | $105,000-$255,000 | 25% |
| > $127,500 | 33% | >$255,000 | 33% |
As you can see, you will pay 25% on your salary once it exceeds $52,500 (if single, $105,000 if married filing jointly). That rate jumps to 33% once wages exceed $127,500 (if single, $255,000 if married). But that’s not the important thing here. What matters is this: under President Trump’s proposal, all business income of a taxpayer will be taxed at 15%. Thus, if you convert your employment relationship to that of a consultant or independent contractor, that same $300,000 of income would be subject to a flat tax of 15%.
Rich? Give to charity before the end of 2017
Gifts to charity are deductible under current law as “itemized deductions.” President-elect Trump, however, is proposing a much more dramatic limit on itemized deductions, promising a top cap of $100,000 (if single, $200,000 if married filing jointly).
If you’re a business owner, don’t buy new assets until 2017
President-elect Trump has proposed allowing for 100% expensing of all asset acquisitions,with no limitation. As a result, you may get a much greater bang for your business buck if you hold off on buying assets until 2017.
Die, but wait until 2017 to do so
Sorry to sound so dramatic, but President Trump isproposing to eliminate the estate tax, making the next four years as good a time as any to head towards the light.
Credit: Forbes
Contact us today and let us help you reduce your tax liabilities! Follow us on Facebook for weekly tax tips!