The Trump rule is here with its own cornucopia of reforms and regulations. Republicans are now controlling the Chambers of Congress. They have already rolled out many tax reforms and, like always, there is a lot of debate about their pros and cons on the commoner and small business owner. Trump has already pushed for significant last-minute alterations to the GOP tax plans during the first year of its rule.
What Trump promised at the beginning of 2017
The beginning of this year saw a significant change towards the reduction of corporate tax rates. The plan states reduction of the maximum of 35% to a maximum of 15%. According to Steve Mnuchin, this will change the way businesses work and pay taxes in the USA. President Trump’s Plan and the plan House Ways and Means Committee has put forth are very similar to each other in this aspect. American businesses should be able to perform better in a global market once corporate taxes stop wringing them dry.
What we are witnessing right now
The new tax savings apply to only C corporations. Partnerships, S-Corporations and Limited Liability Companies (LLCs) will likely not benefit as much from these tax reforms. Trump’s plan includes a maximum tax rate of 15% for all business incomes from these pass-through entities. The exception applies to distributions from all “large” pass-through entities, and the IRS is likely to tax them as dividends as usual. Classifying your business and taking advantage of the new tax deductions can be extremely challenging for small businesses. According to Outsourcing Insight, tax preparation outsourcing will become a renewed trend in 2018.
The changes to GOP tax plans
The new plan upholds the scrapping of Obamacare taxes, and that would save the government over $338 billion in 10 years. The Congressional Budget Office churned out those numbers and in turn, gave the GOP more reason to chop the tax rates.
Trump and his Big Six will likely be able to bring the new tax laws into action by mid-2018. His early campaigns promise a reduction of corporate tax rates to 15%. It is the first time Trump will retract his early promise and move for the introduction of a 20% corporate tax rate. It is still significantly lower than the initial rates.
Better for small business
The income tax rate for all pass-through companies will likely be 25%. Therefore, instead of paying individual tax rates, the business owners will pay a pass-through rate. While this may apply to goods-only producers, it is still going to be a welcome relief. It will surely not apply to service-oriented services.
Lower individual tax rates
In fact, the top individual tax rate will go down from 39.6% to 35%. It also suggests a possible addition of a new and fourth tax bracket. The new reform may even bring the one-time repatriation tax that can become mandatory for all business firms. This one-time tax will be somewhere around 10% for businesses in the USA.
Amidst a lot of controversy, support, and opposition, the new and massive Republican tax reform plan is about to go live at the beginning of next year. It is time you get ready for new tax rates, new brackets and return filing policies with the best tax consultation companies and tax planning agencies in town.