Trump’s Return and Legislative Agenda

Former President Donald Trump has secured a second term in office, gaining broad Republican support and control over both chambers of Congress. With little expected opposition, his administration is poised to advance an ambitious agenda, particularly in the realm of taxation.

 

One of Trump's top priorities is to make permanent the 2017 tax cuts, a move with significant implications for both individuals and businesses. As these potential changes loom, taxpayers and businesses alike should familiarize themselves with what lies ahead in the tax landscape.

 

Key Proposals in Trump's Tax Agenda

Business Tax Cuts Trump is advocating to lower the corporate income tax rate from 21% to 20%, with a potential reduction to 15% for companies that manufacture products in the U.S. While details remain sparse, this could incentivize domestic production.

 

Furthermore, Trump aims to impose tariffs, possibly up to 20% across the board and 60% on imports from China. These tariffs are projected to raise government revenue but could lead to price increases for consumers.

 

Additional proposed business tax changes include:

 

• Eliminating clean-energy tax credits introduced in the 2022 Inflation Reduction Act.
• Reinstating 100% first-year bonus depreciation.
• Allowing businesses to deduct research and development expenses in the year incurred, rather than amortizing over multiple years.

 

Estate Taxes

The 2017 tax reform law nearly doubled the estate and gift tax exemption to $13.61 million per person, with this figure set to drop after 2025. Trump’s goal of making the 2017 tax cuts permanent may extend to maintaining the higher estate tax exemption, but it’s uncertain if further relief will be included.

 

Individual Income Tax

Trump has signaled a desire to permanently lower individual tax rates set by the 2017 Tax Cuts and Jobs Act and possibly reduce the current top income tax rate of 37%. Although specifics are yet to be announced, other proposed changes include:

 

• Lowering the long-term capital gains rate to 15%, down from the current 20%.
• Increasing the child tax credit to $5,000 per child (a 250% rise).
• Making tipped income nontaxable.
• Abolishing income tax on Social Security benefits, a measure popular with retirees but with potential budgetary impacts.
• Introducing tax incentives to promote homeownership, and proposing a tax deduction for the cost of generators in storm-prone areas.

 

SALT Deduction Cap Revisions

The $10,000 cap on state and local tax (SALT) deductions, introduced in 2017, could see modifications under Trump’s renewed administration. Despite his initial support for the cap, he is now open to increasing or removing it, though the decision is contested among his advisors. This change would benefit taxpayers in high-tax states but could also reduce federal revenue, affecting funding for other proposed cuts.

 

Preparing for Change

Trump’s tax proposals could significantly impact both personal finances and business operations, especially in high-tax states. While many details are pending, taxpayers should begin evaluating how potential tax reforms could affect them.

 

With control over Congress, Trump is positioned to advance these tax changes swiftly. Stay tuned for further developments as his administration provides more clarity on the specifics of each proposal.