Goodbye to Biden’s taxes – Here’s what Trump has planned for 2025

Trump’s administration has introduced a set of tax reforms which promises enormous tax relief among others.

With the swearing-in of President Donald Trump on January 20, 2025, his administration was expected to introduce a set of tax reforms that would rework the economic landscape of the United States. While promising enormous tax relief, these proposals have raised debates over their probable impacts on the federal deficit, consumer prices, and the greater economy.

Extending the 2017 Tax Cuts and Jobs Act (TCJA)

The president’s tax policy includes an extension of individual tax cuts set by the 2017 Tax Cuts and Jobs Act. These provisions, which lowered the individual income tax rates across a number of brackets, are set to expire at the end of 2025; their extension would lock in current tax rates for taxpayers and prevent an automatic increase in taxes. Critics counter that such extensions could continue to help, but would tend to favor the higher-income individual and further extend the federal deficit. The Committee for a Responsible Federal Budget estimates that extending these cuts may add as much as $4 trillion to the deficit over the next decade. 

Proposed tariffs and economic consequences

In addition to the tax reform, President Trump has also proposed broad-based tariffs on imports. There is a general tariff of 20% and 60% on Chinese goods.

Even though it is meant to help in saving American jobs by encouraging American production, it is argued by many economists that such tariffs would raise the prices for the American consumer on most basic products and be considered a hike in taxes themselves. 

The Wall Street Journal says that these tariffs “would act like a tax increase for consumers and businesses, just as high oil prices do,” crippling the entire economic landscape. Last but not the least, is the abolition of federal taxes on Social Security benefits. This is supposed to ease the financial burden on retirees. On the other hand, some critics fear this would benefit the high-income class and speed up the depletion of the Social Security trust fund, translating to heavy revenue losses and compromising the solvency of future benefits.

Tax traps and other considerations

As these proposals emerge, there are a number of “tax traps” that the unwary taxpayer should keep in mind:

  1. Tax cuts assumed permanent

The Tax Cuts and Jobs Act of 2017 significantly cut individual income taxes by way of increasing the standard deduction and reducing the highest rates of income tax. Under current law, these provisions expire at the end of 2025. President-elect Trump has proposed making the cuts permanent. These extensions will require action by the Congress which could be very difficult under today’s political conditions.

What can you do? Be prepared for possible tax increases if the extensions are not enacted. Pay close attention to legislative developments, and consider consulting a tax professional who can help in formulating your financial plans accordingly.

  1. Failing to consider the effects of tariffs

President-elect Trump has called for a 20% universal tariff on all imported goods, putting a heightened tariff of 60% on imports from China. Meant to protect US manufacturing, such tariffs might increase the price for many consumer goods in everyday use, therefore working like a tax hike for consumers and businesses alike.

What to do? Stock up before tariffs kick in: Tariffs tend to raise the prices of the affected products. Try domestic alternatives or second-hand markets. Pay attention to trade policy and adjust your investment plans accordingly.

  1. Slowing down clean energy investments

The IRA offers federal tax credits for investment in clean energy of up to $7,500 for qualified EVs and also for installing solar panels. President-elect Trump has spoken about eliminating some of the clean energy tax credits that would include those on offer for EVs. There is some legislative resistance to removing such programs; still, the uncertainty means that delays in these investments could very well equate to the loss of financial benefits.

What can you do? If you’re considering an investment in clean energy, now may be a good time to make that investment and lock in today’s tax credits. Consult with a tax professional who can help you determine how any future changes in policy may affect your qualification.

  1. Relying on changes to the SALT deduction cap

The TCJA imposed a cap on the SALT deduction of $10,000. There have been a number of ideas and discussions about changing or removing this cap, but much pushback remains regarding revenue loss and perceptions that the benefit would again be primarily among high-income households.

What can you do? Don’t count on a SALT cap change. Consider creative solutions at the state level and time taxes paid thoughtfully-while ramping up contributions to accounts that can help reduce potential tax liability.

  1. Not planning your estate and retirement

A preemption of taxes on Social Security benefits is proposed by the President-elect and includes in law changes around many of which still a great deal of uncertainty exists. The exemption amount for the estate tax does not change. It remains coupled with sun setting/reverting to levels in 2025.

What can you do? Continue planning for taxes on Social Security income by managing retirement account withdrawals strategically. Stay abreast of possible changes to come in estate tax laws, and consider engaging the services of an estate planning professional who can help you create a tailored strategy.

Emem Ukpong
Emem Ukponghttps://stimulus-check.com/author/emem-uk/
Hello, I'm Emem Ukpong, a Content Writer at Stimulus Check. I have a Bachelor's degree in Biochemistry, and several professional certifications in Digital Marketing—where I piqued interest in content writing/marketing. My job as a writer isn't fueled by a love for writing, but rather, by my passion for solving problems and providing answers. With over two years of professional experience, I have worked with various companies to write articles, blog posts, social media content, and newsletters, across various niches. However, I specialize in writing and editing economic and social content. Currently, I write news articles and informational content for Stimulus Check. I collaborate with SEO specialists to ensure accurate information gets to the people looking for it in real-time. Outside of work, I love reading, as it relaxes and stimulates my mind. I also love to formulate skin care products—a fun way to channel my creativity and keep the scientist in me alive.

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