With Donald Trump assuming the presidency, many have inquired about potential changes to the tax landscape. While specific policies will require congressional approval, here’s an overview of what we may expect based on Trump’s campaign proposals:
Individual Income Taxes
- Extension of 2017 Tax Cuts: Trump aims to permanently extend the individual tax cuts established by the 2017 Tax Cuts and Jobs Act (TCJA), which are set to expire after 2025.
- Preserve the existing tax brackets, including the current top marginal rate of 37% for high-income earners post-2025.
- Maintain the higher estate and gift tax exemption of $13.61 million per individual or $27.22 million for married couples.
- SALT Deduction: Trump has proposed removing the $10,000 cap on state and local tax (SALT) deductions, potentially benefiting those in high-tax states.
- New Exemptions: Plans include exempting overtime pay, tip income, and Social Security benefits from federal income taxation.
Business Taxes
- Corporate Tax Rate: Trump proposes reducing the corporate tax rate from 21% to 20% for all corporations, with a further reduction to 15% for companies manufacturing in the United States.
- Pass-Through Businesses: The 20% deduction for qualified business income may be extended or expanded.
Other Key Proposals
- Child Tax Credit: There’s consideration to increase the Child Tax Credit to $5,000 per child, up from the current $2,000.
- Auto Loan Interest: A new proposal would make interest on car loans tax-deductible.
- Tariffs: Trump has suggested implementing new tariffs, including a 10-20% tariff on all imported goods and a 60% tariff on goods from China.
Potential Impact
While these proposals aim to reduce taxes for many Americans, the effects may vary based on individual circumstances. High-income earners and businesses could see more significant benefits.
It’s important to note that these are proposals, and their implementation depends on congressional approval and other political factors. The actual impact on your taxes may differ based on your specific financial situation.
