John and Janet Baker are husband and wife and maintain a household in which the

Question

John and Janet Baker are husband and wife and maintain a household in which the following persons live: Calvin and Florence Carter and Darin, Andrea, and Morgan Baker. The Baker’s address is: 12591 Tiger Lane, Baton Rouge, LA 70809.

John and Janet have asked you how they will be impacted by the Trump Tax Plan. They have read some articles but they are curious how these changes will impact individual taxpayers.

1. Explain three provisions of the Trump Tax Plan that will impact the Baker’s as individual taxpayers.

• Write a letter to the Baker’s from your CPA firm providing answers to the questions.

• Write a memo for your firm’s client file that lists and discusses the basis for the advice rendered.

Explanation / Answer

Three provisions of the Trump Tax plan that will impact the Baker’s as individual taxpayers are:

1. The Bakers will benefit from repealing of 3.8% ACA (affordable care act) tax. This is taxed on net investment income and applies to individuals who earn more than $200,000 per year.

2. With adjustments in child and dependent benefit and changes in tax code Bakers will benefit as they most likely have childcare costs.

3. With the proposed repealing of alternative minimum tax (AMT) the Bakers will stand to gain as there will be no supplemental income tax that will be imposed on them by the U.S. federal government.

Thus with the Trump Tax plan individuals and families can hope to gain from the reduction of tax burden, simplification of the process (reducing the number of brackets to three from seven) and consolidation of benefits like exemptions and the standard deduction.

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