This week President Donald Trump made a speech about his administration’s tax reform plan. He addressed truckers in Pennsylvania. Mr. Trump told the truckers his tax reforms will create American jobs by lowering taxes in several ways.
The President also says it will be possible for most Americans to do their taxes on a single sheet of paper.
The particulars of the reform would double the standard deduction so that $12,000 of income for individuals and $24,000 for married couples would be tax-free. It would consolidate the eight existing tax brackets for income to four brackets: zero, 12 percent, 25 percent, and 35 percent. The Child Tax Credit would expand to benefit more middle-income families and eliminate the marriage penalty, although how this will happen isn’t outlined. Finally, the reform would create a new $500 tax credit for those caring for an adult dependent.
The President last night also mentioned something, not in the official release. It’s unclear if this is related to the Section 179 Deduction and Bonus Depreciation tax breaks, but that’s rather how it sounds.
Bonus Depreciation currently allows businesses of all sizes to depreciate 50 percent of the cost of new equipment acquired and put in service during 2017. It also allows the same deduction for some improvements to real-estate. It is scheduled to phase down to 40 percent in 2018 and 30 percent in 2019. This particular tax break is targeted to large businesses.
Farmers generally use the related Section 179 Deduction which also accounts for the purchase of used equipment and caps the dollar amount rather than using a percentage.
The President’s proposal could seek to replace both by combining them into a single deduction which would sunset in five years.