Individual Tax Deductions
A major area of individual tax reform is focused on individual deduction availability and limits. President Trump’s tax plan increases the standard deduction to $15,000 for single taxpayers and $30,000 for married individuals. The president has suggested that this would help simplify tax compliance for many, including removing many current tax payers from the income tax rolls. For those who remain on the tax rolls, the president plans to cap available itemized deductions to $100,000 for single individuals and $200,000 for married individuals. President Trump has not elaborated on where the available itemized deductions under his plan would vary from the current available itemized deductions.
The president also proposed a new deduction for child and dependent care expenses. The expenses associated with child and elder care would be above the line deductions that would phase out at higher income limits. President Trump’s plan also calls for an expansion of the earned income tax credit for working parents that would not qualify for the new deduction. A certain percentage of eligible childcares expenses, subject to a cap of half of the payroll taxes paid by the individual, would be available in the form of a rebate.
The GOP “A Better Way Tax Plan” varies from the president’s plan regarding individual deductions. The GOP plan also increases the standard deduction, but in smaller amounts than the president’s plan. The current plan calls for standard deductions in the amounts of $12,000 for single, 24,000 for married and $18,000 for heads of household. The GOP plan also eliminates all itemized deductions except mortgage interest and charitable contributions
The GOP plan would create a $500 non-refundable credit for dependents who are not children. The plan would also increase the Child Tax Credit to $1,500 per child and raise the phase-out for married households to $150,000.
Both the GOP and President Trump’s plans call for an elimination of the Personal Exemption deduction.
Check back to the Schneider Downs Tax Reform page as new developments are presented by President Trump and Congress