Now let's flip it and look at the rich - sm Posted: Oct 12th, 2017 - 2:42 pm In Reply to: Okay, let's look at $20,000 - sm
We know based on current tax law that the top earners in the country pay 39%. Trump wants to reduce that to 35%. It looks like he's giving the rich a tax break, but he's not.
Let's say I make $1 million/yr. I buy a yacht for $500k and since I use my yacht to entertain clients, and other business stuff, I can take a one-time expense deduction for the entire yacht. Now my taxable income is $500,000, probably lower due to any other deductions I would take, but let's keep it simple.
My tax for 2016 would be 39% of $500k. $195k.
If the Trump tax plan goes through as stated, I can't deduct my yacht. Now my income is $1 million minus my standard deduction of $24,000. Or $976,000. The top tax rate on that is 35%, which works out to $341,600.
Maybe I'm missing something, like the Alternative Minimum Tax. But again, when you do the numbers it looks pretty good. Lower taxes for the poor and middle class while the rich pay more.
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