Trump's Tax Plan: The Top 3 Things You Need To Know Many are wondering what changes President Trump will make now that he's been officially sworn into office.

In regards to the business world, many entrepreneurs and small business owners are concerned about how Presidene Trump's proposed tax plan will affect their businesses. Should you expect to make more or less under the Trump tax plan? Should you prepare your business for a drastic transformation of the tax code? To give you an idea of what changes will take place, let's look at how our current tax plan works and perform a little compare/contrast.

For most entrepreneurs and small businesses, your tax rate is equal to your personal rate because your business income is taxed at your personal rates (unless your business was formed as a C Corporation). Sole proprietors, LLCs, partnerships, and S Corporations are "pass through" entities, meaning that any income is passed through untaxed to business owners who must then pay personal income tax on the amounts passed through to them.

So, how is Donald Trump's tax plan different than our current system? Let's take a look.

1. Simplified Tax Brackets

Structurally speaking, the tax system will get whittled down significantly. Consider this: our current tax system is divided into 7 brackets— and Trump wants to cut that down to only 3 brackets. The 3 proposed tax brackets will be the following:

2. Beefed Up Standard Deduction

Now, let's look at another difference that we'll soon see take effect under the Trump administration: deductions. The current 2017 standard deduction is $12,700 if you're married, and $6,350 if you're single. Under the new Trump tax plan, the new standard deduction would jump up to $30,000 if you're married, and $15,000 if you're single.

3. Eliminating Personal And Dependent Deductions

And consider this important change: all personal exemptions ($4,050 per dependent) would be eliminated completely. In other words, Trump's proposed tax plan would pretty much abolish personal and dependent exemptions, which would be the biggest detriment to large families, whose effective tax rate might increase. At the same time, the Trump tax plan would significantly raise the standard deduction, which is pretty much a positive for entrepreneurs and small businesses. The net result of the new tax system? Simplification.

What This Means For Your Business

Now, this all probably sounds a little abstract. Let's offer a concrete example that demonstrates exactly how your side business or company's True Profit might change under the Trump administration - or what your actual profit is after subtracting business expenses and taxes.

So let's assume you have $100,000 taxable income ("taxable income" means your earnings minus your expenses; the Trump plan is silent on changes to business expense rules, so we will assume those will be the same). You'll file as single and take the standard deduction rather than itemized deductions. So how does the current tax plan vs. the Trump plan affect your True Profit? Let's take a closer look.

Under the current tax code, your $100K in taxable income would incur an estimated $18,139 in taxes, making your True Profit $81,861. Under the Trump plan, your $100K in taxable income would owe an estimated $16,375 in taxes, making your True Profit $83,625.

In simple terms, you'd have a cash savings of $1,764, or an increase in True Profit by 2.15%.

So what does all of this mean for you, the entrepreneur or small business owner? Well, if the Trump tax plan gets passed exactly as outlined (which is pretty unlikely), then you're set to make slightly more than you would under the current system. And it should be easier to calculate and file your taxes.

Now, while this small change doesn't necessitate you making any drastic changes to the way your business operates, knowing the real numbers can help you avoid stress, confusion and/or misguided optimism that you may experience if Trump's tax overhaul get's signed into law.

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