With the election of Donald Trump as the 45th president of the United States, and both the House and Senate remaining in Republican control, it is likely changes will be made to US tax laws for both individuals and corporations. In addition, President-elect Trump’s pledge to repeal and replace the Affordable Care Act (ACA) will result in changes to the ACA related tax provisions.
In this article, Beth Jurgensmeyer compares current US tax law to President-elect Trump’s proposed tax plan and highlights potential impacts to the tax reimbursement costs for your global mobility program.
Current Law vs President-elect Trump’s Proposed Tax Plan
The table below compares certain US individual tax provisions currently in force and the proposed provisions included in President-elect Trump’s Tax Plan:
|
Current Law |
President-elect Trump’s Proposed Tax Plan | |
|
Ordinary Income Rates |
7 brackets with top rate of 39.6% |
Single |
|
Standard Deduction |
>$6,300 (single) |
$15,000 (single) |
|
Personal Exemption |
$4,050 |
Eliminated and included in the standard deduction |
|
Itemized Deduction |
Phase out begins: |
Total itemized deductions capped at: |
|
Like-kind Exchanges |
Accrued under federal law |
No specific proposal |
|
Net Investment Income Tax (NIIT) |
3.8% on adjusted gross income (AGI) above: |
Eliminated |
|
Alternative Minimum Tax (AMT) |
AGI above: |
Eliminated |
|
Capital Gains/Dividends Rates |
Maximum rate of 20% with one year holding period |
No change |
|
Child/Dependent Care Expenses |
Child/Dependent Care Credit limited for AGI over $43,000 |
Above the line deductions for children under age 13 and for care for elderly dependent; |
|
Carried Interest |
Taxed at rates on capital gains |
Taxed as ordinary income |
|
Estate Tax |
Exclusion of $5.45 million adjusted for inflation, top rate of 40% |
Eliminated, except for estates over $10 million which will be subject to capital gains tax |
|
Gift Tax |
Lifetime exclusion of $5.45 million adjusted for inflation; |
Eliminated |
|
Retirement Savings Contributions |
No limit on lifetime contributions |
No specific proposal |
|
Affordable Care Act |
Requirements for minimum coverage or payment of penalty. |
Repealed and replaced. |
In summary, President-elect Trump’s proposed tax plan reduces income tax rates across-the-board and reduces the current seven tax brackets to three. In addition, the plan eliminates AMT and NIIT. Other benefits and deductions are proposed to be changed as noted in the table.
Impact on Tax Reimbursement Cost for Mobility Programs
The proposed reductions to the US individual income tax rates and changes to deductions could impact the tax reimbursement cost of your mobility program. The impact will vary based upon the home and host locations of your employees and the provisions of your tax reimbursement policy. In general, the tax reimbursement cost could increase for US citizens working in high tax countries (e.g., Germany) and could decrease where they are working in low tax countries (e.g., Singapore).
We recommend you review the overall tax reimbursement cost based on the specific facts of your program and implement updated hypothetical tax withholding and tax accruals once any new laws are passed.
If you have any questions about these potential tax law changes, please feel free to contact Beth at bjurgensmeyer@gtn.com or feel free to contact us at help@gtn.com.
The information provided is for general guidance only, and should not be utilized in lieu of obtaining professional advice.
Author: Beth Jurgensmeyer, Director, Compliance Services
GTN Shared Services
+1.303.894.3800 | bjurgensmeyer@gtn.com
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