This is
G&G Associates Tax & Financial Consulting
e-Newsletter
Retirement Accounts
Big Winners Under Trump Tax Plan
G&G Readers,
On September 27, 2017, Trump and the Republican leaders
presented a tax plan that included sharp cuts in tax rates to both
corporations and individuals. Under the Trump tax plan, the corporate
tax rate would fall to 20% from 35% as well as reduce taxes on business
pass-through income to 25%. The tax plan would also allow immediate
write-offs of business investment, preserve tax breaks for research and
low-income housing, while also limiting deductions for interest.
The
tax plan also provides corporations with a one-time tax on stored
foreign profits and would allow the tax-free repatriation of foreign
income. The proposed tax plan would also repeal the estate tax and the
alternative minimum tax. With respect to individuals, the tax plan proposed would collapse seven individual income tax brackets
into three and the top rate on individuals could drop to 35% from 39.6%.
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In addition, the plan would nearly double the standard deduction for most households to $12,000 for individuals and $24,000 for married couples. The plan would also retain the mortgage interest and charitable deductions as well increase the child tax credit. However, the tax plan would eliminate state and local income tax deductions, as well as repeal the personal exemption potential reducing the benefit of the increased standard deduction for many taxpayers.
For example, under the current tax rules, due to the personal exemption of $4050 for each spouse, a dependency exemption of $4050 for each child, and standard deduction of $12,700 for a married couple in 2017, a married couple with two children would not pay tax on the first $28,900 of income. That number is greater than the $24,000 standard deduction the married couple would receive under the proposed tax plan.
The proposed tax plan is short on many important details, however, the increase in the standard deduction under the plan coupled with the elimination of the state and local tax deduction could provide many households with less incentive to itemize their income tax deductions, making the tax deductions such as the mortgage income tax deduction and charitable contribution tax deduction less attractive. {Your Church may not be happy with this as folks may not be to enthusiastic to place money in the offering plate.}
In the case of the reporting of pre-tax IRA or employer qualified retirement plan contributions, such as a 401(k) plan on the 1040 return, the IRS categorizes these deductions as above-the line deductions, meaning one can take the IRA or 401(k) plan deductions regardless of whether one itemizes or claims a standard deduction.
In other words, even if the Trump tax plan causes more households to claim the increased standard deduction and to forego itemizing their tax deductions, since IRA and 401(k) plan pre-tax contributions are above-the-line deductions, the ability to benefit from the pre-tax income deductions associated with making IRA or 401(k) contributions will not be impacted by the Trump tax plan.
In fact, making a pre-tax IRA or pre-tax 401(k) plan contribution could become even more beneficial to many income taxpayers under the Trump tax plan.
The Trump tax plan includes many income tax changes as well as many unknown details. However, the tax and retirement benefits associated with making pre-tax IRA or 401(k) plan contributions appear to be a big winner in the proposed Trump plan.
-------------------------------------------------------------
Internal Sponsorship:
Want to Know How To Protect your Cash
To become a member of the G&G Investment Society (GGIS) newsletter subscription to learn how to take advantage of some of our suggestions so you can protect your wealth and portfolio against a fallen dollar, send an e-mail to GGIS@gngassoc.com and/or visit our website at www.gngassociates.net and click on the “Products & Services” link and we’ll get you signed up right away.
DON'T WAIT ANOTHER DAY!
- 1 year subscription - $149
- 2 year subscription - $269
- Lifetime subscription - $699 {50% off tax prep & 25% off consulting services for life}
*** Membership Guarantee *** If you don't make your money back from being a GGIS member by the end of your subscription...we'll refund 100% of your subscription fee back. That's how confident we are that this will be one of the best financial moves of your life.
-------------------------------------------------------------
In addition, the plan would nearly double the standard deduction for most households to $12,000 for individuals and $24,000 for married couples. The plan would also retain the mortgage interest and charitable deductions as well increase the child tax credit. However, the tax plan would eliminate state and local income tax deductions, as well as repeal the personal exemption potential reducing the benefit of the increased standard deduction for many taxpayers.
For example, under the current tax rules, due to the personal exemption of $4050 for each spouse, a dependency exemption of $4050 for each child, and standard deduction of $12,700 for a married couple in 2017, a married couple with two children would not pay tax on the first $28,900 of income. That number is greater than the $24,000 standard deduction the married couple would receive under the proposed tax plan.
The proposed tax plan is short on many important details, however, the increase in the standard deduction under the plan coupled with the elimination of the state and local tax deduction could provide many households with less incentive to itemize their income tax deductions, making the tax deductions such as the mortgage income tax deduction and charitable contribution tax deduction less attractive. {Your Church may not be happy with this as folks may not be to enthusiastic to place money in the offering plate.}
In the case of the reporting of pre-tax IRA or employer qualified retirement plan contributions, such as a 401(k) plan on the 1040 return, the IRS categorizes these deductions as above-the line deductions, meaning one can take the IRA or 401(k) plan deductions regardless of whether one itemizes or claims a standard deduction.
In other words, even if the Trump tax plan causes more households to claim the increased standard deduction and to forego itemizing their tax deductions, since IRA and 401(k) plan pre-tax contributions are above-the-line deductions, the ability to benefit from the pre-tax income deductions associated with making IRA or 401(k) contributions will not be impacted by the Trump tax plan.
In fact, making a pre-tax IRA or pre-tax 401(k) plan contribution could become even more beneficial to many income taxpayers under the Trump tax plan.
The Trump tax plan includes many income tax changes as well as many unknown details. However, the tax and retirement benefits associated with making pre-tax IRA or 401(k) plan contributions appear to be a big winner in the proposed Trump plan.
Planning and saving for retirement
does not have to be painful. Understanding the rules and employing a
consistent approach can help increase retirement savings while simultaneously
reducing ones tax liability.
One of the benefits of being a client with G&G Associates is that you'll get a free 30 min pre-tax preparation session to make sure you are gathering your documents appropriately before you submit your documents for tax preparation.
So, contact us today to file your return and/or schedule an appointment.
Visit our website for more information and free online webinar classes to help you make sure you are audit proofing your records, or contact us today to set your appointment if you need a “TAX” OR “FINANCIAL” one-on-one consultation.
Until the next time!
Tua (Thank You),
Asar Maa Ra Gray
Tax, Financial & Veteran Consultant
G&G Associates
757-271-6068 office
866-361-3872 toll free fax
www.gngassociates.net
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