Pub. 15 2016-2017 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 4 , 2 0 1 6 22 new jersey auto retailer B eginning January 20, 2017, the Republican Party will be in control of both houses of Congress, as well as the Presidency. President-Elect Trump and GOP leaders of theHouse and Senate have indicated that tax reformwill be addressed early and on a top-priority basis. Although there are some differences in the changes favored by Congress and the President-Elect, there is considerableoverlap in theproposals andgeneral directionand it is very likely that significant tax law legislationwill be implementednext year. Here are some of the proposals available onwebsites ofDonaldTrump and Congressional Republican leaders: 1. Lower and fewer tax rates. Currently there are seven tax rates for individuals stretching from 10% to 39.6%. The top rate ap- plieswhen income exceeds about $470,000 (married taxpayers) and $418,000 (single taxpayers). Donald Trump and GOP leaders pro- pose cutting the seven brackets down to three: 12%, 25%and 33% with the top rate being applied when income exceeds $225,000 (married taxpayers) and $112,500 (single taxpayers). 2. Eliminate Net Investment Income Tax and Alternative Mini- mum Tax for Individuals, Trusts and Estates. Mr. Trump and GOP leaders support these proposals. 3. EliminateEstateTax. Under current law, estates valued inexcess of $5.45 million for one person and $10.9 million for a taxpayer and spouse pay a tax of 40% on the excess value. Heirs receive a “stepped-up” basis on appreciated estate assets, thereby avoiding applicable capital gains taxes upon selling those assets. Donald Trump andGOP leaders propose repealing the estate tax andMr. Trumpwouldalso eliminate the current “stepped-up” basis onap- preciated estate assets in excess of $10million, thereby triggering a capital gain tax to heirs upon sale of those assets. 4. BusinessTaxCuts. The top corporate income tax rate is currently 35%. The tax rate would be reduced to 15% by Mr. Trump and 20% by GOP leaders and corporate AMT tax would be elimi- nated. Most business deductions and creditswould be eliminated except for expensing capital investment for some businesses and the research credit. LIFOreserveswould also be preserved under proposals by GOP leaders. 5. Pass-throughEntityTaxCuts. Business incomepassing through to individual owners of S corporations, partnerships, and sole proprietorships is currently subject to the top income tax rate applicable to the individual owner. This business income would be subject to a reduced top rate of 15% under proposals by Mr. Trump and 25% by GOP leaders. In the past, many tax planning strategies have focused on deferring or accelerating income and deductions recognized in the current year Tax Planning for 2016 and Beyond BY ROCHELLE KIMMINS, CPA