If Trump is reelected as president, your tax return could see several significant changes. Since former President Donald Trump introduced the Tax Cuts and Jobs Act (TCJA) of 2017, many Americans have enjoyed lower taxes. However, some of these provisions are set to expire in 2025. If Trump wins the upcoming election, many of these tax benefits might be extended or made permanent, and new tax changes could be introduced, impacting both low-income and wealthy Americans.
One of the main changes would be the extension of the Tax Cuts and Jobs Act. If Trump is elected for a second term, the tax brackets and standard deductions that were lowered under the TCJA will remain the same, allowing people to continue enjoying the tax benefits of the past few years. Trump might even push to reduce income tax levels further and increase standard deduction amounts.
According to Dennis Shirshikov, head of growth at GoSummer.com, extending these provisions beyond their current expiration in 2025 would allow individuals to benefit from lower tax rates and higher standard deductions for a longer period. However, this could also pose long-term fiscal challenges for the federal government.
Another potential change is reducing taxes on capital gains for wealthy individuals. The Net Investment Income Tax (NIIT), which helps fund the Affordable Care Act, applies to high-income Americans. Trump might propose eliminating this 3.8% tax, which would lower the taxable income for wealthier Americans.
John F. Pace, a CPA and tax manager, explained that eliminating this surtax would reduce taxes for high-income individuals, particularly business owners with investment income. This would benefit those with modified adjusted gross incomes over $200,000 for single filers and $250,000 for married couples filing jointly, as they would avoid paying the additional 3.8% tax on various forms of income, including capital gains, dividends, interest, annuities, royalties, and rents.
Trump might also reintroduce certain deductions and credits that were eliminated under the TCJA. This could add more money to taxpayers’ pockets when they file their returns in 2025. For example, Trump might advocate for restoring the full deductibility of unreimbursed employee expenses, which were previously available under the old tax code but limited by the TCJA. This change would benefit employees who incur significant out-of-pocket expenses related to their jobs.
Additionally, Trump could push for enhanced child tax credits or other family-oriented tax benefits, aiming to provide further financial relief to middle-class families. These adjustments could ease the financial burden for many taxpayers but would also require careful consideration of the broader economic implications.
Trump has also indicated an interest in promoting family savings. Project 2025, run by former Trump officials, plans to establish a “universal savings account.” These accounts would function similarly to a Roth IRA, where earnings could be withdrawn tax-free after reaching age 59.5. However, they would have a much higher annual contribution limit of $15,000 and could be used for virtually any expense.
Ben Johnson, a financial advisor, mentioned that introducing a family savings plan with tax advantages could help families save for various expenses, such as education, health, and child care. While this might be beneficial for higher earners who have more money to save, it could go unused by those who struggle to save enough for retirement after covering their monthly expenses.
Another proposal from Project 2025 is to reduce capital gains tax rates. The current rate is 20%, but Trump might propose lowering it to 15%. This change would disproportionately benefit the wealthiest investors since those making under $47,025 already pay 0%, and those making between $47,026 and $518,900 already pay a 15% tax on capital gains. For individuals with substantial investment income making over $518,900, this reduction could significantly impact their future tax returns.
Dennis Shirshikov noted that lowering the capital gains tax rate could stimulate investment and economic growth by incentivizing more investments in stocks, real estate, and other capital assets. However, it could also exacerbate income inequality by disproportionately benefiting higher-income individuals.
Trump might also increase the annual contribution limits for retirement accounts, such as IRAs and 401(k) plans. This change would allow individuals to save more for retirement and potentially lower their taxable income. For instance, increasing the 401(k) contribution limit from the current $22,500 to $25,000 would help individuals defer more income, reduce their current tax burdens, and increase retirement savings, according to Ben Johnson.
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If Trump is reelected, Americans can expect significant changes to their tax returns. These could include the extension of the Tax Cuts and Jobs Act provisions, the reduction of capital gains taxes for the wealthy, the reintroduction of certain deductions and credits, the establishment of family savings plans, adjustments to capital gains tax rates, and increased retirement contribution limits. These changes aim to provide financial relief but also come with broader economic implications that need careful consideration.
