President Trump announced on Wednesday a proposal for the largest U.S. tax overhaul in three decades. Here’s what is included in the proposed tax plan:

Simplifications and Eliminations

  • The plan would simplify tax cuts by doubling the current standard deduction (to $12,000 for individuals and $24,000 for married couples filing jointly) and eliminating the personal exemption.
  • Increase of the child tax credit and the income limits at which that credit starts to phase out.
  • Elimination of itemized deductions, including state, local, and property tax deductions; however, the mortgage interest deduction and deductions for charitable contributions would remain.
  • $500 non-refundable credit for non-child dependents
  • Repeals the federal estate tax (which taxes inherited wealth greater than $5.49 million) and the generation-skipping transfer tax.

New Tax Brackets

  • The current seven-bracket system would be condensed into a three-bracket system (though the plan leaves open the option for a fourth, higher rate)
  • The proposed new tax brackets are 12%, 25%, and 35%, but the income ranges for these rates is not specified in the plan. Currently the lowest bracket is 10% and the highest is 39.6%.

A Big Tax Cut for Businesses

  • President Trump’s plan would cut the corporate tax rate from 35% to 20%
  • Proposes the creation of a new tax rate of 25% for pass-through businesses (such as sole proprietorships, partnerships, and S-corporations)
  • Would move the current worldwide tax system to a territorial one, thereby eliminating the repatriation tax

Elimination of the Alternative Minimum Tax

  • The original purpose of this tax was to prevent Americans who earn above a certain amount from skimping on their taxes through the use of deductions and loopholes
  • The tax proposal reasons that the tax no longer serves its intended purpose and creates significant complexity