Do you want to pay less taxes? Of course you do, and the sooner you get educated on the new tax plan, the more money you can keep. Rich Dad Advisor, Tom Wheelwright, shared 10 ways you can benefit from Trump’s tax reform:
1. Corporate Tax Rate Reduced to 21% – Corporations are the biggest winners of the Trump Tax Plan by far with a reduced 21% tax rate (reduced 14% from 35%).
2. Small Business 20% Deduction on Pass-Through Income – Small businesses and real estate investors can now take a 20% deduction on their income. Professional service companies, like doctors, lawyers and accountants (though not engineers or architects), business will only get the 20% deduction if their taxable income is less than $157,500 ($315,000 on a joint return).
3. Business Automobile Depreciation Increased – Business owners receive increased tax deductions for business automobile depreciation, which may make buying cars more popular than leasing. Depreciation limits for the first four years increase from $3,160/$5,100/$3,050/$1,875 to $10,000/$16,000/$9,600/$5,760.
4. Business Equipment Section 179 Depreciation Deductions Expanded – Along with equipment (computers, machinery), the Section 179 depreciation deductions for equipment has expanded to include residential rental properties, roofs, HVAC units, fire alarms and security devices.
5. Business Equipment Deductions Expanded – Beyond the Section 179 deduction, businesses can take a 100% deduction for any new or used equipment, including trucks, SUV’s and office equipment.
6. Charity Contributions receive State Tax Credits in Many States – Those who itemize can save money by giving it away. Certain charity contributions receive state tax credits in many states, which give both a credit on state taxes and a deduction on federal taxes.
7. Exemption for Children Hired by Parents Increased to $12,000 – Children who work for their parents’ company (or any other company for that matter) can now earn up to $12,000 without paying any tax.
8. Estate Tax Exclusion Increased – Almost everyone can now leave their money to loved ones without heirs paying an Estate Tax. The Estate Tax Exclusion increased from $5m to $10 m(single) and $10m to $20m (married).
9. Investors Stock Sales After 5-Year Holding Period Are Tax-Free – A long time in the law and a rarely used benefit, now that the corporate tax rate is reduced to 21%, more start-up companies should consider starting as a C Corporation to take advantage of this amazing tax benefit when they sell.
10. Alimony Payment Deductions Continue If Divorced By Year-End 2018 – Alimony has long been deductible to the spouse paying it and taxable to the spouse receiving it. Divorcees can deduct alimony if the divorce is finalized in 2018. Anyone who gets divorced after December 31, 2018, will no longer be able to deduct alimony. Anyone who is planning to get divorced soon should make sure the divorce final in 2018 if they are paying alimony. For anyone on the receiving end, they may want to delay the divorce until 2019.
Individuals can still benefit from deductions for medical expenses, student loan interest and school supplies (bought by teachers).
During the last major tax reform in 1986 under President Ronald Reagan, Tom Wheelwright worked for the National Tax Office at Ernst and Whinney (now Ernst and Young) in Washington D.C., and can provide insights on transition steps.
What are your thoughts on Trump’s tax reform?
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