Who Benefits From Trump’s Tax Plan?

Who are the Winners & Losers in Trump’s Proposed  Tax Plan

While the details are just emerging and the final plan is sure to change, the tax overhaul that Trump & the Republican party recently unveiled has clear beneficiaries; and early indications are it is NOT the “middle class”.  In fact, according to this analysis, Trump’s tax plan will see the majority of the benefits—i.e. tax cuts— to the rich; particularly the top 1% & 0.1%.

 In Indianapolis last Wednesday, Trump outlined his proposal and stated, “…the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up at levels that you haven’t seen in many years…”.   This is your classic “trickle down economics” argument that has been made for decades; that by cutting taxes on big businesses and the wealthy, the average American worker will see the benefits work their way down to them in the form of higher wages and more jobs.  The only problem is that study after study has shown these benefits never really reach the middle class.  Staying true to theory of trickle down, Trump proposes slashing taxes dramatically for Americans who earn north of $730,000 a year.

What’s in Trump’s Tax Plan? 

Although far from finalized, the main points of the plan that affect Individual taxpayers are:

  1. Reduce the tax bracket from seven brackets to three: with tax rates of 12%, 25% and 35% percent with a possibility of adding a fourth bracket.
  2. Doubling the standard deduction from $6,000 to $12,000 for individuals and from $12,000 to $24,000 for those married filing jointly.
  3. Creation of a new tax credit for non-child dependents while increasing the current child tax credit.
  4. Elimination of most itemized deductions but keeping the mortgage interest and charitable giving deductions.  Tax incentives for retirement saving and education plans will be retained; i.e SEP, Traditional, Roth IRA’s and 529 college saving plans etc.

As far as business & corporate taxes, this proposal is just as ambitious.  In President Trump words: “This will be the lowest top marginal income tax rate for small and midsize businesses in this country in more than 80 years…”.  Under this plan, businesses and corporations would see:

  1. A decrease in overall tax rate from 35% to 20%
  2. A new tax rate of 25% for “pass-through” income for businesses like sole proprietorships and partnerships which currently make up nearly 95% of all businesses which are taxed at the rate of their owners.
  3. Limitation of the deductibility of corporate interest expenses, in exchange for the option to immediately expense business investments
  4. Preserves tax credits for research and development and low-income-housing from a business standpoint.

Although the tax plan has a vast amount of changes for individuals & business on many levels, the benefits overwhelming favor the affluent and business owners.

How is the Public Reacting to the Trump Tax Plan?

Proponents of this tax plan for companies are overjoyed: “An encouraging step forward in our shared goal of a tax system that delivers higher economic growth, job creation and wages that our country desperately needs.” said Jamie Dimon, the chief executive of JPMorgan Chase and the chairman of the Business Roundtable.  John Stephens, the AT&T chief financial officer, said it was “A big step toward meaningful reform that would encourage more investment and job creation in the United States.”

Opponents like Edward D. Kleinbard, a tax expert at the University of Southern California law school calls Trump’s Tax Plan “a very cynical document…The extraordinary thing about the proposal is that we know that it loses trillions of dollars in revenue, yet at the same time the only people we can identify as guaranteed winners are the most affluent.”  Even Republican Rand Paul recently came out against Trump’s tax plan calling it a “middle class tax hike”.


This analysis from the Tax Policy Center above clearly illustrates how the current tax proposal favors the wealthy; particularly  the top 1 percent and top 0.1% them.  Pay particular attention to the Share of Total Federal Tax Change.  It breaks down U.S. income earners into 5 categories—from those making the least in the lowest quintile to those making the most in the top quintile.  As you can see, the top quintile reaps a whopping 86.6% of these potential tax cuts!  The other 4 quintiles combined would only realize 13.4% of these cuts. Parsing these numbers even further for the top quintile the majority of tax cuts go to the top 1% (79.7%) and the top 0.1% (39.6%) which equate to an average tax cut of $207,060 & $1,022,120 respectively.  Most Americans don’t even come close to earning the amount of money the top 1% would gain in tax cuts. 

Time & time again, Trump has pledged on the campaign trail and as President that the middle class will see the rewards of his tax cuts and it was time for the rich to pay their fair share by closing tax loopholes amongst other things. However, it is hard to come to any other conclusion than this tax plan, if passed, would overwhelmingly benefit the wealthy and not the middle class. In fact, this plan may create even more tax loopholes that would directly benefit wealthy families.

How Does Trump’s Tax Plan Affect You?

If the previous health care battles are any guide, the political fight to get these cuts enacted will be fierce and has only just begun.  This means that the ordinarily taxpayer can most likely expect tax filing delays—similar or worse than in recent years—while congress bickers…especially for taxpayers who file early.  It will be a while before we can really dig into the ultimate affects of whichever Trump’s tax proposal is ultimately passed.  One thing is for certain: In it’s current form the only real beneficiaries to this proposal are those that make nearly a $1 million or more annually.  Because of all this uncertainty and the prospect for an increase in taxes for the middle class, hiring the services of a Tax Professional this tax season may be well worth the money as they can help you navigate this complicated tax climate as well as potentially unlock benefits you might ordinarily overlook.

If you’d like more information about out how Trump’s existing or eventual tax proposal will affect you, feel free to contact us via the web or call us toll-free at (888) APRIL-15 to speak to an R&G Brenner Tax Professional.

Please feel free to comment below on Trump’s proposed tax overhaul.

What NOT to Do on Your Taxes

Mistakes to avoid on your taxes
Mistakes to avoid on your taxes

Filing taxes is a painstaking process for almost everyone and every year, without fail, many returns full of mistakes are sent in to the IRS. In fact, mistakes are extremely common on tax returns, with an error rate of 50 percent; on self-prepared returns, according to the Government Accountability Office. There is a near-infinite number of things that can be done wrong on tax returns, from simple computational errors to missing out on deductions. Knowing which mistakes people commonly make is a good place to start when trying to avoid making them yourself. To that end, here’s what not to do on your taxes.

Include Undocumented Charitable Contributions

Though many charitable contributions are deductible, not every donation qualifies, and those that do must be meticulously documented. Every donation requires an accurate record, complete with confirmation receipts of the donation amount from the recipient at a qualified charity. Many people now donate money to crowdfunding campaigns, such as those hosted through Kickstarter, but many of these, because donors receive goods or services in return, don’t qualify as charitable contributions.

Taking a Write-Off for College You Don’t Qualify For

There are currently two write-offs available for college education: a $4,000 tuition and fees deduction and the $2,500 American Opportunity Tax Credit. Most people take the tuition and fees deduction because it seems like more money, but because the AOTC gives a dollar-for-dollar reduction, as opposed to lowering the income subject to tax, it can often be a better deal. It’s worth crunching some numbers to figure out which is the better option for you each time you file.

Claiming State Refunds as Income

Many people make the mistake of claiming their state tax refunds as income on federal tax returns. The only time a state tax refund should be declared is if the filer does not receive a tax benefit from deducting the taxes. Taking a standard deduction as opposed to itemizing means the filer doesn’t need to show state tax refunds as income.

Confusing Real Estate Taxes

Confusion regarding real estate and other property is one of the biggest sources of tax mistakes. People often take the wrong deductions, on everything from home offices to mortgage interest payments. New homeowners should be particularly careful and make sure to check which taxes they paid during closing to ensure they apply for the accurate deductions on their returns.

Forgetting IRA Savings

Throughout the year many people make regular IRA contributions, but they often forget to report them when filing their tax returns. Many of these IRA contributions qualify individuals for tax breaks. Furthermore, reporting all contributions is mandatory and even nondeductible contributions should be reported in order to avoid paying for them during retirement.

Incorrectly Reporting Foreign Investments

Though foreign investments are only applicable to a relatively small percentage of the tax base, they are amongst the more costly areas to make mistakes. Failing to accurately report foreign bank or financial accounts unintentionally carries a penalty of $10,000 per violation. For willful violations, the fine is $100,000 or 50 percent of the balance of the unreported account at the time of violation, for each violation, if the IRS catches it in an audit. That’s a very expensive mistake!

Changing Jobs and Withholding Too Much/Too Little

Those who switch jobs during the middle of the year and have combined earnings of greater than $117,000 should make sure they are not having extra money withheld. The maximum withholding rate is 6.2% for the first $117,000 of income, but both employers may withhold this amount if the employee made less than that sum at each individual company, meaning the filer would pay too much. It might make for a nice, big tax return, but it also means you’re overpaying on your taxes, and no one wants that.  On the flip-side, if you switch jobs or get promoted and withhold too little, you could be surprised you owe taxes come April 15th when you were expecting a refund.

Overpaying on Investments Sold

Making mistakes on investments sold is frequent as it requires many calculations and meticulous record keeping of stock splits, reinvested dividends, capital gains distributions, and sales commissions. There are several online tools available to help investors make accurate calculations of shares bought. Make sure to keep clear records of all your investments.

These are just a few of the things you absolutely shouldn’t do on your taxes. While it’s by no means an exhaustive list, these mistakes are some of the most frequent—and also some of the easiest to avoid. If you’re concerned that you’ve made mistakes (or will make mistakes) on your taxes, you can always contact an R&G Brenner tax professional for assistance.

The Most Important Tax Issues to Focus on This Year, According to the Experts

The Most Important 2015 Tax Issues
The Most Important 2015 Tax Issues

Taxes are never a fun process, and there can be a great deal of confusion about how much to pay or how to get the most money back. With tax season in full swing, many people are finding themselves lost in a flurry of financial advice that’s hitting them from all directions and it’s difficult to sort through all the noise. Here’s some advice from tax experts about what issues they consider the most important tax issues of 2015:

Review New Tax Rules

Every tax-paying family or individual has a unique situation and the only way to know how the code will affect each unique situation is by taking time to look at the new regulations. Among the issues that could affect families is the change to flexible spending accounts (FSAs) and health savings accounts (HSAs). While in 2013 money could be rolled over from the prior year, in 2014 carrying over the money makes one ineligible to participate in the HSA for 2015. There are also several other adjustments to consider regarding capital gains, deductions, and an alternative minimum tax.

Don’t Miss Out on Free Money

Believe it or not, there’s a good deal of free money going around, and it’s yours for the taking. Private wealth-manager George Papadopoulos has several suggestions for where people can get this free money, including participating in their employer’s retirement plan, using company insurance policies and employee stock-purchase plans, and taking advantage of credit card promotions.

For company retirement plans, make sure you are contributing enough to get all of the matching funds, which will also allow participants to enjoy the growing tax-deferred funds in future years. The health insurance plans offered by companies have a number of advantages, frequently offering flexible spending accounts for health and child care as well as health savings accounts. Stock-purchase plans can help employees purchase stocks at 10-15% below the market value, putting capital gain directly into the employees’ paychecks. Credit card promotions are a great way to collect free cash for every dollar spent, but make sure to choose carefully.

Consider Moving Certain Assets to Non-taxable Accounts

Where one is keeping their assets can also play a large role in how much they are paying or not paying in taxes. For instance, the government taxes bonds and stocks at different rates. Dividends and long-term capital gains are taxed at the relatively reasonable rate of 15%, while nearly all interest income is taxed at regular income tax rates, which can reach up to 35%. That’s why doing some shifting around and moving fixed-income assets to nontaxable accounts can minimize the amount of tax expenditures to which you’re exposed. Money in nontaxable accounts is also harder to access, but it’s important to consider moving assets to nontaxable accounts, as it could lead to significant savings.

Maximizing Roth IRA Savings

If you don’t have one already, a Roth IRA allows you to save for retirement in a nontaxable account as long as you meet certain guidelines. One of the ways to take advantage is to contribute the maximum you can every year. Use these contributions to focus on stock options, opting first for high-quality dividend growth stocks. Converting funds from a traditional IRA or 401(k) often allows people to pay less in taxes, though it’s important to plan out as the year of conversion will include the amount converted as part of taxable income. Finding out the specific details for how to save using Roth IRA is the best place to start.

For more information about the above topics and more, please contact an R&G Brenner tax professional today!

Filing for Divorce? 5 Important Tax Tips

5 Tax Tips For Divorced Couples
5 Tax Tips For Divorced Couples

Divorce can be a sensitive topic and a difficult period of time for all the parties involved. Whether you live in a common law or community property state, the process of filing taxes once the divorce has been finalized can be both emotional and complicated. Deciding how assets are split, the cost basis of these assets, new filing status and even which former spouse will claim children as dependents are all important considerations that go into the tax filing process after divorce. Here are 5 things to keep in mind when filing taxes after a divorce

#1 Determine Which Taxpayer Will Claim Children as a Dependent

After 2009 a tax filer with shared custodial rights of a child or children must cede their claim for a tax exemption to the controlling ex-spouse by filing Form 8332. The significance of this filing should not be taken lightly. A custodial parent who is able to claim a child as a dependent is permitted a deduction of $3,900 on their tax return, which reduces their taxable income. This applies to all children living at home at least 6 months old up to age 19, or 24 if the child is a full-time college student.

#2 Determine Your New Tax Filing Status

A divorce will change a formerly married filing separately or joint filing status to single, regardless of when the divorce was finalized within the tax year. Also consider that if you want to file as head of household, you will have had to have lived apart from your ex-spouse for at least six weeks and contribute more than half of the money to support the household. Being able to file as head of household can result in a bigger tax savings, so review your situation–or have and experienced tax professional review your situation–carefully.

#3 Understand the Impact Alimony Will Have Upon Divorce

Alimony may be necessary as a source of income for a divorcing spouse that has either stopped working, is returning to the workforce or is making significantly less than the other spouse. Be careful, however, as alimony payments made from one spouse to another are considered taxable income to the recipient spouse. Depending on your income level, if you are the one receiving alimony from your former spouse, the additional income could affect your tax bracket potentially pushing you into a higher bracket and a bigger tax liability.

#4 Understand the Impact of Dividing Assets Upon Divorce

There are some tradeoffs that come when assets are divided, particularly a home. Gains that may have been subject to exemption as a result of a sale, for example, would be halved if the asset is sold under a divorce decree. The spouse who receives the home as part of the divorce settlement (if a sale is not ordered) will have the ability to claim the mortgage interest deduction. Discuss with a tax professional carefully how the receipt or sale of certain assets will show up on your tax return and what tax benefits or disadvantages you will receive or give up.

#5 Understand How Divorce Will Affect Your Retirement Plan

Many times divorce results in the splitting up of retirement assets held by a working spouse, such as those held in an IRA or 401(k). Be sure to secure what is known as a qualified domestic relations order (QDRO) in order to secure treatment of these assets as your personal retirement assets and not those of your former spouse. Failure to do so could result in disastrous tax treatment once those assets pass from one spouse to another, such as in the case of death.

It’s important to take all the details of a divorce into account when filing your taxes. If you have questions about what you are entitled to and how your tax status is changing after a divorce, don’t hesitate to contact an experienced R&G Brenner tax professional

Marriage and Taxes; How Should I File?


How Should I File?
How Should I File?

If you’re planning a wedding in the future or you’ve just tied the knot, congratulations! You’ve made a major life move that should be celebrated. And as the responsible person that you are, there’s no doubt that you’ve given a lot of thought to what marriage will mean, including any financial benefits, obligations, or just plain life changes. To answer these questions, here’s a succinct briefing on taxes for married couples. Read on for all you need to know about new tax credits and deductions that you may qualify for, whether or not you should file a joint tax return together or separately, and special circumstances that may apply to you. 

Should We File as a Couple or Individually?

A lot of people are concerned about receiving a “marriage penalty” from the IRS—that is, being taxed more for combing incomes, putting you (and your spouse) in a higher income bracket. Naturally, the IRS applies higher tax rates to higher incomes. If you and your spouse’s salaries are similar, then there’s a good chance that you may indeed have to pay more taxes. However, if you and your spouse have a large disparity in personal income levels, then there’s a good chance that you’ll actually be receiving a bit of a tax bonus by getting married. The larger the disparity in incomes, the more likely that getting married and filing a joint return will push the higher earner’s income into a lower bracket, meaning that the two of you will actually pay less in taxes. 

What Deductions or Tax Credits Do We Qualify for? 

One of the benefits of getting married is being able to qualify for more charitable donation deductions by combining incomes, putting you in a higher tax bracket and therefore increasing the number of charitable contributions you can claim on your taxes. Another benefit is that if one spouse isn’t employed, they can still open an IRA account, putting away money for retirement and receiving tax benefits. If you and your spouse are also purchasing a home for the first time, there are a lot of tax deductions for first time home-buyers as well. Being married also can protect a spouse who acts as a benefactor in the unfortunate case that one spouse, particularly a wealthy spouse, passes away. A deceased spouse can leave tax-free money to a spouse, in any amount, without generating any estate tax, protecting the benefactor. Another benefit? Filing one tax return form instead of two is simply quicker and more efficient. 

Are There any Special Circumstances that Might Apply?

The date that you’re married matters—marriage is counted for the entirety of the year, even if you’re wed on New Year’s Eve. Therefore, if you’re planning an end of the year wedding, keep in mind that you can file taxes as a married couple for the preceding months of the year. Another thing that may be applicable is what to do in the event that one of you owes back taxes. In this case, the spouse who doesn’t owe the back taxes can file a special document known as an 8379 Injured Spouse Allocation Form. The form ensures that the spouse who doesn’t owe back taxes still receives their tax return, even in the event that the spouse who does owe back taxes has his or hers withheld. 

Getting married can be a tax benefit depending on your circumstances. For more information about filing the most beneficial way, contact an R&G Brenner professional today.