Since his return to the White House, President Trump has frequently announced intentions to make swift changes across the board, including the federal tax system. Congress is already working on legislation that would extend and expand provisions of the sweeping Tax Cuts and Jobs Act( TCJA), as well as incorporate some of Trump’ s tax-related campaign promises.
To that end, GOP lawmakers in the U. S. House of Representatives have compiled a 50-page document identifying potential avenues they may take, as well as how much these tax and other fiscal changes would cost or save.
Here’ s a preview of potential individual and business tax changes that might be on the horizon:
Big Plans
The TCJA is the signature tax legislation from Trump’ s first term in office, and it cut income tax rates for many taxpayers. Some provisions— including the majority affecting individuals— are slated to expire at the end of 2025. The nonpartisan Congressional Budget Office estimates that extending the temporary TCJA provisions would cost $ 4.6 trillion over 10 years. For context, the federal debt currently rings in at more than $ 35 trillion, and the budget deficit is $ 711 billion.
Below is an overview of anticipated changes for both businesses and individuals:
Businesses
• Reduce the current 21 % corporate tax rate to 20 % or 15 %, with the goal of generating growth.
• Eliminate the 15 % corporate alternative minimum tax imposed by the Inflation Reduction Act( IRA).
Individuals
• Eliminate the estate tax( which currently applies only to estates worth more than $ 13.99 million).
• Repeal or raise the $ 10,000 cap on the deduction for state and local taxes.
• Create a deduction for auto loan interest.
Additionally, President Trump has voiced his desire to cut IRS funding, which would reduce expenditures but also reduce revenues. Without offsets, these plans would drive up the deficit significantly.
Possible Offsets
The House GOP document outlines numerous possibilities beyond just spending reductions to pay for these tax cuts.
Changes in Tax Breaks
To help generate savings, the GOP document proposes making changes to various tax breaks, such as:
• The mortgage interest deduction. Suggestions include eliminating the deduction or lowering the current $ 750,000 limit to $ 500,000.
• Head of household status. Possibly eliminating this status, which provides a higher standard deduction and certain other tax benefits to unmarried taxpayers with children compared to single filers.
• The child and dependent care tax credit. Considers eliminating the credit for qualified child and dependent care expenses.
• Renewable energy tax credits. The IRA created or expanded various tax credits encouraging renewable energy use, including tax credits for electric vehicles and residential clean energy improvements, such as solar panels and heat pumps. The GOP has proposed changes ranging from a full repeal of the IRA to more limited deductions.
• Employer-provided benefits. Revenue could be raised by eliminating taxable income exclusions for transportation benefits and on-site gyms.
• Health insurance subsidies. Premium tax credits are currently available for households with income above 400 % of the federal poverty line( the amounts phase out as income increases). Revenue could be raised by limiting such subsidies to the“ most needy Americans.”
• Eliminate income taxes on tips, overtime and Social Security benefits.
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