Did you hear the news? America has elected Donald Trump as the nation’s 45th president. So, unless you’ve been in a coma or hiding out in a cave in the middle of nowhere, then you already know that. It’s also very likely that you’ve already started to wonder how this unbelievable chain of events is going to affect you, including what it will mean for your taxes. While it’s true that your tax situation will likely be different a year from now, it will take some time to figure it all out. However, you can still start to plan and prepare for a Trump presidency, regarding your taxes
What to Prepare for
There’s little doubt that president-elect Trump, together with Congress, will act fast to change the nation’s tax system dramatically as soon as he takes office early next year. To see what some of those change will likely click here. In the meantime, the real question becomes what can you do to be ready for the changes? Let’s take a look.
Consider Deferring Income – in any given year deferring income to the following year can be a good move, but this year, in particular, it could pay big dividends. That’s because Trump wants to cut our current seven tax brackets down to just three. For many, especially the top earners that would mean significant savings: going from 39.6 percent to just 33 percent. The key is determining where you are currently as opposed to where you would be after the changes. Some people will actually end up paying a higher rate.
Time Sell Investments? – Although Trump has stated he would keep the current rates for capital gains of 0 percent, 15 percent, and 20 percent, there are some that currently pay 15 percent that would be bumped up to the 20 percent rate. That’s because Trump’s top bracket starts at $127,500 for singles and $255,000 for married filing jointly.
Consider Your Employment – Trump‘s plan would make all business income of a taxpayer taxed at 15 percent. Essentially, that means you could change your status as an employee to an independent contractor or consultant and be taxed at a flat 15 percent rate instead of a much higher 25 percent or 33 percent.
Time to Give Some Away – Trump has proposed limiting itemized deductions to $100,000, which could greatly affect the wealthy, who can itemize as much as $250,000 for singles and $300,000 for married filing jointly currently. Therefore, now might be a good time to make large charitable donations, as next year you likely won’t receive nearly as much in deductions.
Wait Till Next Year for New Business Assets – If you own a business don’t buy new assets until 2017. The reason? Trump says he wants to allow 100 percent expensing of all assets, without limitations. That means your business deductions could go a lot further starting next year instead of having to deduct the cost of assets over many years.
Don’t Die This Year – Trump has also stated that he wants to eliminate the estate tax, so by putting off death till at least next year, your beneficiaries would benefit even more.