Getty Images; Jenny Chang-Rodriguez/BI
Election Day is here, and no matter who wins, you'll probably see changes to your tax bill in 2025.
In the fourth installment of BI's five-part election series, Business Insider is looking at the ways each candidate's policies could affect how much you pay in taxes. (Read part one about investments, part two about costs, and part three about housing.)
Each of the three sections below represents a key segment of the taxpaying population: low- and middle-income earners, high-income earners, and businesses. BI will unpack how a Trump or Harris presidency is expected to affect all three groups.
Under Trump's proposal, lower- and middle-income Americans could see some tax reductions, especially if they're trying to pay off a car or have a job that relies primarily on tips. Trump has proposed extending his slew of tax cuts from the Tax Cuts and Jobs Act of 2017 — also known as the "Trump tax cut." He's also seeking to eliminate taxes on tips, overtime, and Social Security benefits, as well as making car interest payments tax deductible.
Based on an analysis from the left-leaning Institute on Taxation and Economic Policy, keeping the income-tax cuts from the TCJA alone could mean a tax reduction of just over $1,000 for the middle 20% of Americans.
But another part of Trump's tax policy — his plan to levy universal tariffs on all US imports — could end up undercutting this positive impact. Economic analyses have found that those tariffs could offset the tax benefits and then some for lower-earning Americans.
Factoring in the cost of tariffs, Trump's tax package could result in higher tax bills for everyone but the top 5%, the Institute on Taxation and Economic Policy found.
"A lot of those tariffs do end up harming lower-income families and taxpayers who buy goods from abroad," Garrett Watson, a senior policy analyst at the right-leaning Tax Foundation, said.
Harris has proposed an expanded earned-income tax credit aimed at lower-income earners, and she wants to restore and expand upon a more generous child tax credit, similar to the one implemented under Biden's pandemic-relief bill in 2021. The Tax Policy Center estimates that Harris' proposals could bring down household taxes by an average of $750 — with the lowest-income earners seeing their after-tax incomes grow the most.
Harris' and Trump's proposals share some key similarities: Both have proposed some version of eliminating taxes on tips. While Harris hasn't outlined specifically what she'd preserve from the TCJA, she's maintained Biden's promise not to raise taxes on those making below $400,000. The Trump campaign has also shown interest in bolstering the child tax credit.
If Trump makes all the TCJA's income-tax provisions permanent, middle-income Americans would get a tax break of about $1,000, while the top 0.1% of earners would see a cut of nearly $280,000, a Tax Policy Center analysis found.
Another boon for wealthy Americans would be an extension of the break in estate taxes. The TCJA doubled the amount of inherited wealth that could be considered tax-exempt, from around $5.5 million in 2017 to around $11.2 million in 2018.
Trump has floated lifting the $10,000 cap on the State and Local Tax deduction, known as SALT, from his 2017 tax bill. SALT mostly impacts affluent taxpayers in blue states with high local taxes, and a repeal of the cap would restore a tax break mostly enjoyed by higher earners in places like California, New Jersey, and New York, said Benjamin Page, a senior fellow at the Urban-Brookings Tax Policy Center.
Harris' tax proposals target higher earners to help offset costs — if the TCJA were to expire for taxpayers making over $400,000, the top marginal rate would increase from 37% to 39.6%. She also supports two measures that have gained traction during the Biden administration: targeting ultrawealthy investors' capital gains and imposing a minimum income tax on billionaires.
"Unlike the Trump campaign, the other shoe for the Harris-Walz campaign comes on the high end," Ernie Tedeschi, the director of economics at the Yale Budget Lab and the former chief economist at the White House Council of Economic Advisers, said.
Harris has proposed bumping the tax on capital gains for Americans making $1 million or more from 20% to 28%. That would mean a higher tax rate on the money wealthy Americans make when they sell off assets like real estate or stocks — a key source of income for more affluent taxpayers.
Harris also supports a minimum income tax for billionaires, a proposal Biden has touted. She hasn't released specifics on what that would look like.
Harris wants to bump up the corporate tax rate from 21% to 28%, while Trump has proposed lowering it from 21% to 15% for firms that make their products in the US.
Harris has proposed some specific breaks for small businesses. Her key proposals include beefing up the startup deduction for new businesses from $5,000 to $50,000, creating a standard deduction for small businesses, and incentivizing local governments to ease up red tape, such as doing away with barriers to licensing and making it easier to recognize credentials across states.
"Many startups may be able to deduct the cost of those startup expenses more quickly and more fully, which could encourage, at least on that margin, a little bit more startup activity," Watson said.
Meanwhile, Tedeschi said Trump's tariffs could weigh on small businesses. Importers might have to choose between raising prices or absorbing the cost through lower margins.
But Tedeschi said both candidates' proposals to eliminate taxes on tips could ultimately be a boon for small businesses.
"The employer's going to be able to pay a little bit less for those jobs, given the demand for them," he said. "The tipped workers are probably going to end up fine because again, their tips are tax-free."
Trump's proposal to eliminate taxes on overtime pay could also benefit small businesses by allowing them to reconfigure how they schedule and pay workers.
One question mark for both campaigns is a TCJA provision that allows some business owners to deduct their business income from their taxable income. Democrats in Congress are hoping to preserve the deduction for business owners making under $400,000 but change it for those above that threshold, a Senate Finance Committee aide told BI.
