President Trump is promising one of the biggest tax cuts in American history, and his administration just released new details. The president plans to roll out his campaign promise of reducing from seven tax brackets to three and other steps to simplify the tax code. Tony Drake, CFP® talks with Milwaukee’s WTMJ-4 about the plan for individual tax reform.
The Trump Administration says its effort is to simplify the tax code, which is hundreds of pages long and takes Americans billions of hours to file each year. Not all of the details were laid out, but there are four main components outlined:
- Reducing Tax Brackets
- Raising Standard Deduction
- Eliminating Tax Deductions
- Repealing Taxes
Click here for a tax withholding calculator from the IRS
Retirement savers may start to consider Roth IRAs or Roth 401(k)s if these tax changes are put into place. With a Roth IRA, you pay taxes on your investment today, however, if you follow the rules, your money will not be taxed when you withdraw it in retirement. A Roth IRA or 401(k) could be a good choice for an investor who anticipates moving into a higher tax bracket in the future. However, we still don’t know whether Mr. Trump’s tax plan will pass and in what form. It’s important to talk with a tax professional and a financial professional who can help you figure out what’s best for your personal situation.