What the Election Results Mean for Future Tax Policy: Tax Updates With CAPATA
With Donald Trump set to return to the White House in January, tax policy is likely to undergo significant changes. The recent presidential campaign highlighted several tax-related proposals, and with Republican control of the Senate confirmed, the stage is set for potential policy shifts—though the final balance of power in the House remains uncertain.
Key Focus: Expiring Tax Cuts from the 2017 TCJA
One of the primary issues will be the fate of the 2017 Tax Cuts and Jobs Act (TCJA). Many provisions from this act, which was a hallmark of Trump’s first term, are set to expire. Extending these provisions could add an estimated $4.6 trillion to the federal deficit. Rochelle Hodes, a tax principal at Crowe, explained that if these cuts expire, individual tax rates may increase—a scenario few policymakers favor.
The Republican Party aims to make many TCJA provisions permanent, such as the doubled standard deduction. There’s also talk of lowering the corporate tax rate further, potentially below the current 21%.
Revisiting State and Local Tax Deductions
In response to feedback from states with high local taxes, Trump has shown openness to reassessing the $10,000 cap on state and local tax (SALT) deductions established in the TCJA. This policy change could offer relief for taxpayers in high-tax states.
Additional Tax Proposals
Trump has also proposed several specific tax cuts, including:
- Removing taxes on tips for hospitality and restaurant workers
- Eliminating taxes on Social Security benefits
- Cutting taxes on overtime pay
- Providing tax relief for firefighters, police officers, and military personnel
- Offering a family caregiver tax credit for those supporting elderly parents or loved ones
- Allowing buyers of American-made cars to write off loan interest
Funding Considerations
To offset the costs of these tax cuts, Trump has proposed implementing higher tariffs on imported goods. Additionally, reductions in IRS funding are being considered, which may impact revenue collection efforts and potentially shift the tax enforcement landscape.
Conclusion
As tax policy discussions progress, CAPATA will keep you updated on any changes that may impact your tax planning and strategies. Feel free to reach out to us with any questions on how these proposals could affect your financial situation.
