Donald Trump took the oath as the 47th President of the US on 20 Jan 2025 and took charge of the Presidential office. With Trump’s second inning all set, the US citizens were speculating about the tax plans for the years ahead.
After Trump’s win in November 2024, economists and analysts have been predicting and sharing the expected tax changes that Trump can make in his second term. People wondering about Trump’s Income tax plan 2025 can check the expected changes in the coming year.
Trump Income Tax Plan 2025
The newly elected US President Donald Trump will soon uncover his Income tax plan for 2025 and the years ahead that people have speculated about since his victory. After Trump’s win people are expecting major changes in the tax plan because during his first term also he overhauled the tax laws and introduced the 2017 TCJA (Tax Cuts and Jobs Act).
The TCJA 2017 provisions will expire by this year’s end, hence people are expecting the expansion of the act as it supports many provisions for instance child tax credit, standard deduction, and many others. Many believe Trump will expand the TCJA 2017 for sure and with other tax changes.
President Trump has indicated many changes during this period which we can expect in the coming tax plans, for instance, the tariff hike, tax cuts, social security benefits, and others. People are expecting Trump’s tax plan for 2025 would make things easier for them. As Trump was sworn in as the U.S. president, he signed many executive orders, people can expect the tax plan soon.
What Income tax law changes can you expect?
Taxpayers and businesses can check the following expected income tax plan that will bring some changes to the current tax system:
- The TCJA 2017 expansion can benefit small businesses as the act lowered many corporate taxes for businesses. The corporation tax rates were lowered from a maximum of 35 percent to a flat 21 percent under the TCJA. The TCJA’s expiration provisions do not apply to this modification, however, the act also has a tax benefit that allows pass-through companies, including S-corporations, partnerships, and sole proprietors: to deduct 20% of their qualified income for the eligible business, which is scheduled to stop at the end of 2025.
- President Trump has suggested during his campaign trial to remove the State and Local Tax (SALT) limit. The recent report suggests the SALT deduction limit could be raised to $20,000 from $10,000 and double for the couples who filed returns jointly.
- The reports suggest that the Trump administration can stop taxes on some income, for instance, the social security benefits income, overtime pay, and tip income. In September 2024, the Republicans supported the elimination of taxes on social security benefits, overtime pay, and tips to offer some financial relief.
- Trump also suggested during his campaign trial to reduce the taxes for US citizens living in foreign countries as in the current system the expatriates pay taxes on income they made in the foreign land. The administration may plan some offset or other provisions for them like foreign earned income exclusions, etc.
Trump’s introducing new tariffs and External Revenue Service
With the income tax plan, Trump has earlier introduced their plan to increase the tariff on goods coming from foreign sources. The Trump administration may create an External Revenue Service that will collect new tariffs, which the US companies pay on imported goods. According to Trump’s interviews and suggestions, the administration will increase the tariffs to 20% and 60% on Chinese goods.
The government has said that the high tariffs will impact businesses that rely on foreign goods or do business with China and other countries. This will increase the price of goods or imported items for consumers. The tariff increase would increase the revenue for the local product and may encourage domestic production, it will offer more job opportunities for the Americans.
Impact of the Trump’s Income Tax Plan 2025
The economist and others have discussed the following impact of the expected Trump’s Income tax plan that every American should understand:
- The tax cuts on certain income, or lower income tax rate would need Congressional approval which can be challenging for the administration to implement. However, the tax cuts under the TCJA could maintain the financial relief for the Americans.
- The tax exemption on overtime pay and tips would offer financial relief to them and help them earn more as they usually earn and improve their livelihood.
- The elimination of taxes for social security beneficiaries could improve their life and help them get the benefit, however, it can lead to federal revenue losses.
- The SALT cap hike would expect tax relief, especially high-income tax earners and people living in states with high-taxes.
- The corporate tax reduction may benefit businesses with more investment and job opportunities for Americans.
Trump’s second term has officially begun, and people can expect several tax changes from the expansion of TCJA to tax cuts. The administration can reveal the income tax plan for 2025 soon, so be ready and stay tuned.