Increased taxes for middle class families?
This is a time of uncertainty for all of us. Being proactive is key in these times. We know the tax law as it stands, and have some clue as to how it may change in the next four years.
Several of the proposed changes include cutting the tax brackets from seven down to three, limiting itemized deductions for high income taxpayers, eliminating personal exemptions and eliminating the alternative minimum tax (AMT) and the additional Medicare tax. There are pros and cons to all of these proposed changes and there is going to be much debate about how they will change the tax situation of Americans and the market in general.
Under the three tax brackets, those with a taxable income between $0 and $37,500 ($0 to $75,000 for married filers) would be subject to a 12 percent tax rate; taxable income between $37,500 to $112,500 (or $75,000 to $225,000 for married filers) would be subject to a 25 percent rate. Those with tax-
February 17, 2017
able income above $112,500 ($225,000+ for married filers) would be subject to a 33 percent federal tax rate.
Itemized deductions for the wealthiest Americans would be capped at $100,000 for single filers, and twice that for those who are married. This means that wealthy couples who want to give a million dollars to charity would only be able to deduct a fifth of that versus the current 39 percent.
Two changes in the plan could increase taxes for many middle class families.
First, it eliminates personal exemptions, which are about $4,000 for individuals and each of their children or dependents. Second, it eliminates the “head of household” tax filing status that’s typically used by single parents. So, millions of families with many kids – and single parents – could end up with higher taxes under President Trump’s proposal, according to an analysis by Lily Batchelder of the New York University School of Law.
The plan would eliminate the 3.8 percent tax on net investment income on people with incomes (MAGI) of over $200,000 for