(image courtesy of Washington Times)
Here at the Rules of Thumb blog from MoneyThumb.com we usually don't get into politics, but with the election of a new President of the United States in the form of Donald Trump, today we will make an exception. The reason we feel strongly about posting this particular blog today is that Forbes has such a great article that concerns all Americans, but especially the accounting and finance field, both on a personal and business level, since the changes to finance and taxes predicted with Donald Trump as our new president will effect your clients.
The article is called How President Trump Will Affect Your Wallet by Forbes Contributor Rob Berger, and we consider it a must-read so we can be prepared for coming changes to our financial outlook and taxes. Below are a few important highlights from the article:
President Trump's First 100 Days
- Taxes--Federal income taxes will come down significantly for everybody. In addition, the tax brackets will be reduced from seven to three. For joint returns, here are the three brackets:
- Less than $75,000: 12%
- More than $75,000 but less than $225,000: 25%
- More than $225,000: 33%
- Trump’s tax plan increases the standard deduction to $30,000 ($15,000 for single filers). The personal exemption will be eliminated. And importantly, itemized deductions will be capped at $200,000 ($100,000 for single filers). These changes will benefit the working-class, while potentially increasing taxes (although at a lower tax rate) of the wealthy by capping itemized deductions.In short, every working American’s wallet will get fatter under Trump, with hedge fund managers the one exception.
- Child Care--Trump has proposed an above-the-line deduction of up to $5,000 for childcare of children under age 13. An above-the-line deduction doesn’t require a taxpayer to itemize. These deductions reduce adjusted gross income. The deduction is unavailable to high income earners.
- For families making $62,400 ($31,200 for single filers), Trump would offer a childcare rebate through the Earned Income Tax Credit.
- Families could establish a Dependent Care Savings Accounts with an annual contribution limit of $2,000. For low-income families, the government will provide a 50% match up to $1,000 a year. Interestingly, funds still in the account when the child turns 18 could be used for educational expenses.
- Healthcare--Trump has made clear that he will seek the repeal of the Affordable Care Act. He wants to replace the ACA with new reforms, according to Trump’s Healthcare Reform White Paper. These reforms include the following:
- Allow health insurance to be sold across state lines
- Allow individuals to fully deduct health insurance premiums
- Allow individuals to use Health Savings Accounts (currently use is restricted to those with high deductible health insurance plans)
- National Debt--Trump has made clear that he will seek the repeal of the Affordable Care Act. He wants to replace the ACA with new reforms, according to Trump’s Healthcare Reform White Paper. These reforms include the following:
- Allow health insurance to be sold across state lines
- Allow individuals to fully deduct health insurance premiums
- Allow individuals to use Health Savings Accounts (currently use is restricted to those with high deductible health insurance plans)
These are major highlights from the Forbes article, How Will President Trump Affect Your Wallet. We hope this helps ease any anxiety you might be feeling with the election results. As they always say, knowledge is power and now you have something solid to refer to when it comes to changes in your finance and accounting issues under a new US regime.
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