The Many Effects of the Proposed Tax Plan
President Donald Trump has recently proposed a tax plan that will affect virtually all Americans in some way. From estate planning to retirement to tax deductions to cutting important programs such as Medicare,. The plan has been deemed unjust by many, but no matter what Americans think of it, it may soon become the law of the land. Therefore, it’s important to understand the laws and how they will affect you.
The AMT and payroll surcharge will be eliminated, which will help those expecting to take large capital gains, such as through the sale of property or a business. Corporations will see tax cuts, which will benefit you if you have stocks. More revenue for businesses means more money for you as well.
The tax system will change, decreasing the number of tax brackets from seven to four at the most. This could affect how 401(k) plans operate, since the money in these accounts are not taxed. These retirement plans may be replaced by Roth IRAs and other plans in which money is taxed before being deposited.
Retirees will see fewer opportunities for tax deductions. Mortgage interest will no longer be able to be deducted, so retirees will have to focus on giving to charity if they want any write-offs.
While Social Security won’t be affected by the tax plan, Medicare will face major cuts. It is estimated to be cut by $28 billion next year.
Under Trump’s proposed plan, those who have hefty estate plans will benefit. Currently, those with estates exceeding $5.49 million have to pay a 40 percent estate tax. Trump wants to increase this amount. The tax exemptions for gift, estate and generation-skipping transfers will increase by $5 million, which would bump up the new transfer amount to about $11.2 million (based on inflation). For a married couple, this amounts to $22.4 million.
The previous exemption did not affect many people. Only 0.2 percent of estates had to pay taxes, so this new exemption will decrease the amount even further. It’s still important to have an estate plan in place to direct your assets according to your wishes.
Currently, there is an estate tax on distributions made from a qualified domestic trust (QDT) to the surviving spouse, as well as on the value remaining in the QDT when the surviving spouse dies. Under the plan, this estate tax will be eliminated.
Work with an Estate Planning Lawyer in Brooklyn
Estate and retirement planning can be challenging, and it can be hard to keep track of all the changes, especially when the laws change every year. Get help making the right decisions for your future. Theodore Alatsas ESQ is an estate planning lawyer in Brooklyn who can help you with estate planning issues you may encounter through changes in tax laws. Contact our office at (718) 233-2903 for a free consultation.