Trump and Taxes

[junebugdaddy]

 

Woke up at 3 AM to feed newborn, and saw the results of the election. Not my personal choice for president (yes I voted), but as a democracy, the majority electoral college appears to have spoken.

From a personal and professional business viewpoint, what are the tax implications of a Trump/Republican presidency for physicians and other HIE?

Will there be a future WCI blog post about possible tax changes under this new president?

Longtime reader, first time poster. Thank you, WCI team, for this blog!

[DarrVao777]

I'll believe in a tax cut when I see it (although it will certainly be welcomed if it happens)

[jhwkr542]

I'm not sure the needle will be moved THAT much with regards to taxes.  The Republicans don't have a filibuster-proof majority in the senate, so that will tame down some grand plans.  Also, remember many Republican politicians didn't like him either.  His plan to cut taxes would certainly benefit high income earners more, but that's if he gets it enacted.  His proposal is such a massive overhaul of the current tax brackets.  It'll be an interesting 4 years, to say the least.

[jfoxcpacfp]

Harry Reid broke the filibuster, so don't necessarily count on that. It will be interesting, I agree.

Trump wants to:

1. Eliminate estate taxes - plan to die in the next 4 years and save your family some money


2. Cut corporate tax rate from 35% to 15% flat tax rate. ALL business profits, including s-corp, sole prop & ptrship


3. Move personal tax rates to 3 brackets: 12% (1st $75k), 25% ($75k to $225k and LTCG rate of 15%) and 33% (above $225k LTCG rate of 20%)

There will need to be some reconciliation between the 33% rate as an individual and the 15% as a business (including IC's). Something to think about. Also, I've read nothing about FICA taxation (where/how it will apply).

As always, the devil is in the details.

[Zaphod]

jfoxcpacfp wrote:

Harry Reid broke the filibuster, so don’t necessarily count on that. It will be interesting, I agree.

Trump wants to:

1. Eliminate estate taxes – plan to die in the next 4 years and save your family some money


2. Cut corporate tax rate from 35% to 15% flat tax rate. ALL business profits, including s-corp, sole prop & ptrship


3. Move personal tax rates to 3 brackets: 12% (1st $75k), 25% ($75k to $225k and LTCG rate of 15%) and 33% (above $225k LTCG rate of 20%)

There will need to be some reconciliation between the 33% rate as an individual and the 15% as a business (including IC’s). Something to think about. Also, I’ve read nothing about FICA taxation (where/how it will apply).

As always, the devil is in the details.

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Interesting indeed.

 

The majority has not spoken though. We again find ourselves with a winner of the popular vote losing the electoral college, but that is our system though I think it needs to get some consideration as the very real possibility we could have ended in a tie last night was ridiculous. Whats sad and more to the first point is our antiquated voting system and general apathy towards civic duty, we get somewhere around 50% of voting age population to participate. Thats ok but certainly not great.

[junebugdaddy]

zaphod, thank you for the correction. Updated initial post

[Craigy]

Tax wise, even if Trump and the Republican congress gets zero tax cuts through, we're already way, way ahead because we're not going to be facing the tremendous Clinton tax increases to make everyone pay his or her "fair share."     So off the bat, it's a huge tax victory here.  Any further cuts are just icing on the cake.

One of the biggest, most overlooked aspects that excited me about Trump's stance on taxes is his explicit position against the marriage penalty.  Repealing the marriage penalty would help high-dual income households like many of us have tremendously, and get rid of literally being penalized with thousands of extra dollars in tax simply for being married.  Most conservative candidates don't even bring this up as an issue, but Trump did.  I really hope that this becomes a part of his administration and we get rid of the marriage penalty once and for all.

[Josh0731]

I never pay too much attention to these presidential candidate tax plans - who know what a tax reform bill will look like after it makes its way through the legislative process?  We haven't run a federal budget surplus since around 1999, so where does all this tax cut money come from?  I wouldn't be shocked if some of it came from healthcare spending cuts and/or ACA repeal, so its not going to be an entirely free lunch for us as a profession.

All I do know is this: I'm a well-compensated physician, but I'm not spectacularly wealthy, I don't make money like some guy who owns a cataract center.  I pay some taxes from the top couple of brackets, but not a lot.  I doubt a tax break for the wealthy would really put much money back in my pocket, and I suspect I'm not that dissimilar from a lot of physicians in that regard.  And I'd happily pay some additional taxes if it meant avoiding emboldening the voices of white supremacists and anti-semites, among other fine things that come packaged with our new leader.

[DMFA]

Read my lips...no new taxes! ...remember that?

All I can say is "we'll see."  I don't think WCI would spend his time on a post that's purely speculative.  In between any presidential tax plan comes the incredibly long process of it coming through the House, where finance bills originate as per the good ol' Constitution, then getting amended to whatever end product by the Senate, then being re-approved in the House, then signed by the President.  How long did the ACA take to finally pass and then to be enacted from when Obama got elected, like 3-5 years?

So, by the time the Republican President's idea gets presented by a Republican subordinate in the Republican House and goes through the Republican Senate and ends up on his Republican e-Desk (or do they still use a quill and ink wells?  That'd be p cool) to sign it, even though they're all aligned, we could be dealing with a very different entity from what Trump originally envisioned.

[Craigy]

DMFA wrote:

Read my lips…no new taxes! …remember that?

All I can say is “we’ll see.”  I don’t think WCI would spend his time on a post that’s purely speculative.  In between any presidential tax plan comes the incredibly long process of it coming through the House, where finance bills originate as per the good ol’ Constitution, then getting amended to whatever end product by the Senate, then being re-approved in the House, then signed by the President.  How long did the ACA take to finally pass and then to be enacted from when Obama got elected, like 3-5 years?

So, by the time the Republican President’s idea gets presented by a Republican subordinate in the Republican House and goes through the Republican Senate and ends up on his Republican e-Desk (or do they still use a quill and ink wells?  That’d be p cool) to sign it, even though they’re all aligned, we could be dealing with a very different entity from what Trump originally envisioned.

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Bush 41 was a weenie.   

But I agree, all of the goals will not come to fruition.  It'll be something less than that.

[Craigy]

Josh0731 wrote:

  And I’d happily pay some additional taxes if it meant avoiding emboldening the voices of white supremacists and anti-semites, among other fine things that come packaged with our new leader.

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Ugh  :P  Give me a break.

[heartdoc]

Suppose you are in private practice as an S-Corp and you make $500,000 a year.

Currently, you would pay $0 corporate taxes as S-Corp. At the highest tax bracket, you'd pay 39% personal tax bracket.

Under trump tax, corporate tax is 15%.

Would it still apply to s-corp?

It would be nice to be able to be taxed only 15% but I don't think that's happening.

Ii think physicians making $200-500k won't benefit much at all.

[junebugdaddy]

"Trump, however, would provide a unified business rate of 15%, meaning not only would corporations pay tax at that rate, but all business income – even the income earned by an individual from an S corporation, partnership, or sole-proprietorship and reported on the individual’s tax return — will be subject to the same 15% rate. This means that a taxpayer earning business income would experience a drop in top tax rate from 39.6% to 15% under the Trump presidency"

Source:
http://www.forbes.com/sites/anthonynitti/2016/11/09/president-trump-what-does-it-mean-for-your-tax-bill/?nowelcome&utm_source=FBPAGE&utm_medium=social&utm_content=650169697&utm_campaign=sprinklrForbesMainFB#3ee7d4894b8b

[jfoxcpacfp]

heartdoc wrote:

Suppose you are in private practice as an S-Corp and you make $500,000 a year.

Currently, you would pay $0 corporate taxes as S-Corp. At the highest tax bracket, you’d pay 39% personal tax bracket.

Under trump tax, corporate tax is 15%.

Would it still apply to s-corp?

It would be nice to be able to be taxed only 15% but I don’t think that’s happening.

Ii think physicians making $200-500k won’t benefit much at all.

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As Trump envisions his tax plan, tax on all business income is defined as "corporate" tax. You would pay 15% of the $500k or $75k (if he gets his way and that's a BIG if). See EDIT next.

EDIT: You would pay the personal income tax rates on employee income. The remaining profits would be taxed at 15%. iow, you would be better off as a PLLC or sole proprietor, not an S-corp (PLLCs not allowed for doctors in CA). Can't see this provision lasting as is.

[Kamban]

jfoxcpacfp wrote:

EDIT: You would pay the personal income tax rates on employee income. The remaining profits would be taxed at 15%. iow, you would be better off as a PLLC or sole proprietor, not an S-corp (PLLCs not allowed for doctors in CA). Can’t see this provision lasting as is.

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Paying 15 % and then 33 % when you get it through a S Corp is double taxation of the same income. I suspect credit will be given for the 15 % corporate tax paid, otherwise I don't see it passing congress.