President Donald Trump is perhaps the most polarizing U.S. president of all time. Despite his sometimes-questionable rhetoric, one thing has remained constant throughout his campaign and presidency: Trump is 100% in support of American business.

Throughout the election and into his time in office, Trump’s pro-business stance has given confidence to investors, who have sent the stock market soaring higher. Less than a year into his term, indexes are sitting near all-time highs and bullish sentiment is bursting at the seams. 

Among the most talked about plans of the new administration is tax reform. While large corporations stand to gain the most from the potential changes, everyday investors will likely also benefit. 

What To Expect From Trump’s Tax Plan
1. Higher Dividends
Income investors rejoice! One of the most appealing effects of Trump’s proposed tax reform will be higher dividends across the board. 

#-ad_banner-#The President has stated that he wants to slash the corporate rate all the way down to 20% from the current 35%. Primarily designed to incentivize corporations from fleeing the United States in search of lower rates, the tax plan represents $1.8 trillion in tax savings over the next decade. This inflow of wealth will likely be passed along to investors in the form of higher dividends and stock buybacks.

Another factor that will ramp up corporate cash piles is the proposed cash repatriation holiday. It is estimated that U.S. corporations hold $2.5 trillion offshore. Most hesitate to bring the money back into the United States since repatriated cash is currently taxed at the standard rate minus what has been paid in the lower tax jurisdiction. The endgame is that the United States will alter its tax code to a territorial system, sparing multinationals from U.S. taxes on revenues already taxed by other nations. 

The first step in the process would be a one-time tax on repatriated cash that could be paid over time rather than as a lump sum. Large multinationals like Microsoft (Nasdaq: MSFT) and Cisco (Nasdaq: CSCO) have the most to gain in this scenario. Not only can the firms pay this cash out in the form of dividends and buybacks, but it will also allow for more significant innovation, more acquisitions, and greater overall corporate growth. 

Individual dividend investors will also benefit in another way. Dividends are currently taxed at a top rate of 23.8%, but Trump’s tax plan proposes knocking this down to 20%. This may seem small, but that extra bit of income can add up to big gains for the average investor. 

2. The Elimination Of Deductions
Now for the bad news: Trump’s tax plan needs to make up for its corporate tax cuts somewhere, and it will probably mean a serious hit to available tax deductions. If you’re a small business owner or even just working as a contractor out of your home, you understand just how critical tax deductions are in the current taxation regime. 

Trump’s original idea was to cap itemized deductions at $100,000 for single filers and $200,000 for joint filers. However, the latest iteration of the plan eliminates nearly all itemized deductions. Believe it or not, this includes local and state taxes, meaning you will no longer be able to write off the money paid to local and state taxes on your Federal tax return. 

Salaried employees are not nearly as affected by the elimination of deductions. In fact, they stand to benefit, as the standard deduction is expected to be doubled.

Fortunately, the mortgage interest and charitable contribution write-offs are not affected by the pending plan. Regular salaried workers will not feel this change very much. However, it will likely create a burden on small businesses and self-employed workers.

It’s important to note that an increase in the child care tax credit is expected under the White House’s plan. Of course, it is unlikely this will counteract the other write-off eliminations to any meaningful degree.

3. No Estate Tax And Lower Taxes For High Earners
The combination of eliminating the estate tax and lowering the top marginal tax rate will be a significant benefit for high-income investors.

Under the new plan, the highest marginal tax rate will drop to 35% from the current 39.6%. While only the highest earners making over $418,000 in annual income pay this percentage, the pending tax decrease is designed to free up investment capital for the wealthy. How this money is reinvested can have numerous benefits for the entire economy and the stock market.

Risks To Consider: Trump faces considerable headwinds in passing this legislation. His confrontational manner that worked wonders in the election is seen as a liability in the real halls of power. Do not expect the finalized tax reform package to be identical to Trump’s proposed one. 

Action To Take: The White House is moving in a very bullish direction with the tax plan. Despite the struggle to implement the plan, positive business sentiment is driving many stocks higher. Consider buying or ramping up your holdings in multinational companies to capture this momentum and position ahead of positive tax reform. 

Editor’s Note: I know it sounds incredible… but the IRS offers a retirement program that lets you opt-out of the tax system completely. We call it the 408(a) loophole. Use it correctly and you can triple your cash flow in retirement. Just ask Marc W. He found out about the loophole in 2004, took $25,000 out of his IRA… and grew it into $245,000. Christine F. has been getting over 10% for the past five years. Richard M. is doing even better, making 12.3%. And Samuel G. says “Last year I made about $5,000 per month.” As long as you are a U.S. citizen with a retirement account, you can join them immediately. Here is what you need to do right now…