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Trumping Your Taxes

Opinion

By Orlando Gotay

Last week, I dreamed up an article structured about the change either presidential outcome would bring. Well, sorpresa! Two days after the election, I have at least one specific fact to work with, along with several maybes.

With President Trump in office, it is clear there will be major tax reforms on the horizon, as those are central to his vision for jump-starting the economy. The rubber meets the road in the Congress, where earlier in the year, Republican leadership rolled out its “blueprint” on how to fix the tax code. Presidential initiatives will have to go through Congress, with some more likely to pass than others. Here’s my take:

Obamacare will be repealed or, at the very least, gutted. The hatred for this is vitriolic. Tax aspects that will likely vanish going forward are shared responsibility payments, premium tax credits, the Net Investment Income Tax, additional payroll tax, medical device tax and some other charges. (What Obamacare will be replaced with is altogether a different discussion).

For individuals, “flatter” (and lower) tax brackets are on the horizon, leaving four (0%, 12%, 25%, 33%) instead of the current seven. Standard deductions would increase (US$30k married, US$15k single). The existing US$4,000 personal exemption would be rolled into the standard deduction. Head of household would be eliminated. Child and education credits would be rearranged and simplified.

Taxes on capital gains, dividends, and interest would be lower, and the personal Alternative Minimum Tax would be abolished. Small businesses would be taxed at a preferred 15% rate. And the estate and generation-skipping taxes are on the chopping block once again.

As far as I can tell, the documented proposals from either Trump or the Republicans in Congress do not mention simplification of taxation for overseas US persons or FBAR (“same country” exemption) or FATCA simplification. There is, however, talk of making the IRS more customer-friendly. I’d personally like to see that, but I doubt it will happen this term. Things there just do not move that fast.

On the corporate side, I’ll mention only one provision you may care for: a proposed one-time repatriation of corporate earnings, paying a 10% tax. Republicans and Trump, in particular, want to bring to the US all American money out there. That is why I don’t think there will be any easing on rules to detect unreported income.

Stay tunedwe are in for a very interesting rideand tax will be front and center in the policies of the new government.

 

Orlando Gotay is a California-licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the US Tax Court, and other taxing agencies. His love of things Mexican has led him to devote part of his practice to the tax matters of US expats in Mexico. He can be reached at tax@orlandogotay.com.

 

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