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What to Expect from Potential Tax Changes Under President Trump’s New Term — and How to Prepare

As tax professionals, we know that changes in leadership often bring shifts in tax policy, affecting everything from deductions and exemptions to estate taxes and business regulations. With President Donald Trump’s recent re-election, we may see updates to tax policy based on his prior administration's actions and new proposals. For individuals and businesses alike, understanding these changes and planning ahead could make a substantial difference in tax savings and financial efficiency.

In this article, we’ll explore what tax policies may be on the horizon, including proposed extensions of the Tax Cuts and Jobs Act (TCJA) and potential new deductions and exemptions. Keep in mind that while these policies aren’t yet set in stone, we’re here to provide insight and preparation strategies for our clients. As always, we encourage you to contact our office with any questions on tax planning and potential impacts on your situation.

1. Extending the Tax Cuts and Jobs Act (TCJA) Provisions for Individuals

The TCJA introduced significant tax cuts in 2017, benefiting both individuals and corporations. However, many of these provisions are set to expire after 2025. President Trump’s recent policy stance suggests a priority to make these individual tax cuts permanent, which could mean continued benefits for many taxpayers, especially those in middle to high-income brackets. Some key areas that could be impacted if the TCJA provisions are extended include:

  • Itemized Deductions: This could mean the ongoing suspension of certain itemized deductions, including the phase-out of the deduction limit for specific items, as well as limitations on deductions for personal casualty losses.

  • Charitable Contributions: The increased percentage limit for cash contributions to public charities (from 50% to 60%) may remain, offering more generous opportunities for tax savings through charitable giving.

  • Home-Related Deductions: The qualified residence interest deduction could see changes, with limits on home equity interest deductions continuing.

  • Student Loan Assistance: Extended provisions could retain exclusions for certain student loan discharges and employer-provided student loan assistance, helping borrowers manage debt with some tax relief.

How to Prepare: Individuals can start by reviewing their deductions and contributions, especially if charitable giving or homeownership is part of their financial strategy. Planning around these extended provisions could help you maximize deductions and reduce taxable income.

2. Changes to Exemptions and Exclusions

Trump’s proposals include expanding certain exclusions and exemptions, aiming to simplify tax calculations and provide relief for specific income sources. Here are a few areas that may see changes:

  • Social Security Benefits, Tips, and Overtime Pay: A proposed exemption for these income sources could reduce taxable income for many taxpayers, especially those nearing retirement or working in overtime-intensive industries.

  • Increased Estate and Gift Tax Exemptions: This change would further raise the threshold for estate and gift tax liabilities, benefiting high-net-worth individuals and families looking to pass on wealth without a significant tax burden.

How to Prepare: Consider incorporating these potential exemptions into your income planning strategy. For high-income earners, this could mean updating estate plans and exploring additional wealth transfer strategies to maximize potential tax savings.

3. Eliminating the SALT Cap

One of the more contentious aspects of the TCJA was the $1