By: Tom Andrews, CPA
Now that a republican president has been elected to office along with a majority republican congress, tax reform is almost certain. Since the election I have had a handful of clients contact me to inquire how tax reform might affect them. At this time I do not have an answer, while the President-elect’s tax proposal may seem aggressive it seems many of his proposals have been extreme. By his own admission his proposals are a starting point with an anticipated negotiable outcome. Before discussing how these proposals might affect yacht crew, let’s review the broad strokes of the President-elects proposed plan:
- Condense the tax code to three brackets 12%, 25%, and 33%.
- Eliminate the 3.8% net investment tax.
- Eliminate the carried interest deduction.
- Eliminate the $4,000 personal exemption.
- Increase the standard deduction from $6,300 to $15,000 for single individuals and $12,600 to $30,000 for married individuals.
I believe that most yacht crewmembers will be most directly affected by proposals 1, 4, and 5. Proposals 2 and 3 should have minimal impact to the average yacht crewmember. Again these proposals are only a starting point to a much larger negotiation. The President-elect has also proposed a ten year one trillion dollar infrastructure investment, most economists have predicted that such a large spending bill will require greater tax receipts than what will be produced from the Presidents tax plan proposal.
It should also be noted that repeal of the affordable care act will also have a direct impact to yacht crewmembers. Under current law the “individual mandate” requires all US citizens to be enrolled in a qualified insurance plan for the entire year failure to have qualified insurance may result in substantial penalties. Many crewmembers have been forced on a vessel policy that is not always in compliance with the affordable care act.
Another factor that might have a greater impact on the lives of yacht crew is how these tax proposals will affect the yacht owner. It is predicted that these proposals will cut taxes dramatically for the top 1% of income earners, if this is the case the luxury yacht economy might prosper as a result. The yachting industry saw an explosion during President Bush’s first term in office, some attribute this to the aggressive tax cuts that were enacted at that time.
In conclusion every tax payer is different, I recommend yacht crewmembers to contact their CPA’s for a more detailed as to how they might be individually affected. Again the above proposals are only a starting point to a much larger debate that will occur in the very near future.