The 2024 election has come to a close, and Trump was reelected for his second term and will be the 47th president of the United States. As a result, the tax policies and initiatives that are currently in place may change, according to all that he spoke about during his campaign.
While we cannot yet know for certain what he will change or how it will impact us, we have summarized the prospective adjustments that Trump has said he will make. With this information in mind, we can try to strategize for 2025 and the years that follow.
Trump’s proposed tax plans in 2025
According to the Tax Foundation’s YouTube channel, approximately 62% of tax filers may face an increase in tax responsibilities — due to the loss of tax cuts — if Congress does not act to extend the 2017 Tax Cuts and Jobs Act provisions that are currently set to expire on Dec. 31, 2025. The estimated cost of not extending these provisions is in the trillions, and these are the specific provisions that may be affected:
- Pass-through income deduction: If this provision expires, pass-through entities will no longer be able to deduct up to 20% of qualified business income at tax time.
- Bonus depreciation: Should this provision not be renewed, the 100% bonus depreciation provision is set to be phased out by 2027.
- Research and development: Unless the amortization requirement is either repealed or modified, it will remain in effect in 2025 and for the foreseeable future.
- Business interest deduction: The rules regarding this deduction will likely revert to the rules that were in place before the TCJA.
- Individual income tax rates: The marginal tax rates for individuals are likely going to revert to pre-TCJA levels, which includes a maximum rate of 39.6% versus the original 37% rate.
- Standard deduction: It is said that the standard deduction may return to pre-TCJA levels, though there will be an adjustment to account for inflation.
- Mortgage interest: Taxpayers might be able to claim deductions on mortgage interest rates for properties that are valued up to $1 million.
- Charitable donation deductions: According to the new plans, charitable contributions deductions could revert back to 50% of your adjusted gross income.
- State and local tax deductions: The $10,000 SALT deduction cap will no longer be in effect.
- Estate and gift taxes: Exemptions from estate and gift taxes are thought to be reverting to pre-TCJA levels, though they will be adjusted for inflation.
- Child tax credit: The maximum child tax credit will drop down to $1,000 per child. The income thresholds will decrease to $75,000 for individuals and $110,000 for those who are married.
The TCJA contained the following measures:
- Global intangible low-taxed income tax.
- Foreign-derived intangible income tax.
- Base erosion and anti-abuse tax.
TCJA and the future
In 2024, a global agreement known as Pillar 2 went into effect in many countries. Pillar 2’s goals — to curb base erosion and profit shifting — applied a 15% minimum tax rate for certain multinational enterprises. However, the TCJA’s provisions clash with Pillar 2 on several key details.
While U.S. companies are somewhat protected by a safe-harbor provision, it is set to expire at the end of 2026. Currently, it remains to be seen how Trump’s incoming administration will handle these differences. That said, the president-elect has proposed a universal baseline tariff.
This proposal has estimated that costs for U.S. households will increase by $1,253 in 2025 if a 10% universal tariff is imposed. If a 20% universal tariff goes into effect, then annual expenses are more likely to climb by $2,045 instead.
Some experts claim that tariffs will cause a net reduction in tax revenue and economic output, which they believe will not only increase taxes and costs for lower- and middle-income taxpayers but will also likely send inflation rates soaring. However, it is unclear how interest rates will be impacted by the proposed tariffs.
How to proceed in the face of economic uncertainty
Furthermore, Trump has suggested his intention to implement even more tax provisions beyond those mentioned above. According to his plans, he intends to apply additional cuts to corporate taxes that would exempt from federal taxes the income from tips, overtime pay and Social Security benefits. instead of panicking or rejoicing, both of which would be premature moves. Stay tuned, as we will have more information in the coming months.
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