President-elect Donald Trump has proposed the largest tax cuts since Ronald Reagan.
If Trump were to get everything he has proposed from a Republican-controlled Congress, a taxpayer who makes between $48,000 to $83,000 a year would save about $1,000 under his plan, said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
People in the top 0.01%, making $3.7 million or more in a year, would receive $1 million in annual tax savings.
"He is proposing tax cuts for the very people he ran against in his campaign," Gleckman said.
Expect significant tax changes under a Trump administration, according to Howard Wagner, managing director at Crowe National Tax Services.
If Trump sticks to his campaign promises, here are the major things his administration wants to change on individual taxes:
- Reduce seven federal tax brackets to three with rates of 12%, 25% and 33%. The top rate would fall from 39.6% to 33%.
- Increases the standard deduction from $6,300 to $15,000 for single filers and from $12,600 to $30,000 for married couples filing jointly while ending personal exemptions.
- Cap itemized deductions at $100,000 for single filers and $200,000 for married couples filing jointly.
- Eliminate the 3.8% tax on net investment income on people who have a modified adjusted gross income of over $200,000 for single filers and $250,000 for married couples filing jointly.
- Repeal the alternative minimum tax and the estate tax.
Trump has also proposed taxing income from carried interest at ordinary income tax rates, which will not only affect hedge fund managers, but high earners with investment income, said Joshua Milgrim, a tax partner in Dechert's New York office.
How Trump will pay for the tax cuts
Trump has proposed no net spending reductions to offset his tax plan's $7 trillion increase in the debt, according to the Committee for a Responsible Federal Budget's estimates.
"I'm guessing Trump is going to care less about the details than just getting tax reform passed," said William Gale, co-director of the Tax Policy Center.
Trump's plan borrows heavily from a tax proposal from House Republicans. Gleckman will be watching what Senate Finance Committee Chairman Orrin Hatch, R-Utah, will do because his plan is different from Trump's and the House GOP plan.
Regardless, you will likely see changes to your taxes with a Trump administration. "I think we are going to get major tax reform," Gale said. "It is the one thing that unites the Republican Party and they have all the levelers of power."