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President-elect Donald Trump and the incoming Republican congressional majorities could have a big impact on your taxes next year.
Many provisions from President-elect Donald Trump's 2017 Tax Cuts and Jobs Act are set to expire by the end of this year unless Congress renews the tax bill. On the campaign trail, Trump proposed extending many of the law's provisions and adding more.
"We refer to this next year as the Tax Super Bowl. It's a big one," said Mark Baran, the managing director at the financial and professional services firm CBIZ's National Tax Office in Washington, DC.
If the TCJA is extended, and Trump's new provisions — such as eliminating taxes on tips — are added, many Americans could see their individual tax rates drop, or at least stay low. Additionally, Republicans are eyeing an even bigger increase to the original child tax credit from the TCJA while Biden-era tax provisions like the electric-vehicle credit are on the chopping block.
Trump's 2017 tax package had an immediate effect on many Americans — it brought down individual tax rates for almost all filers, doubled the child tax credit to $2,000 per child from $1,000, and doubled the standard deduction that Americans could claim, among other measures. If the Tax Cuts and Jobs Act isn't extended, more than 62% of filers would face a tax increase in 2026, per an analysis from the Tax Foundation.
"President Trump is committed to lowering the tax burden on the American people who elected him in November with an overwhelming mandate to Make America Wealthy Again," Trump spokesperson Karoline Leavitt said in a statement to BI. "The Trump Administration will be dedicated to ensuring that American workers keep more of their hard earned dollars in their pockets while growing the strongest and most resilient economy the world has ever seen."
"From a planning standpoint, I would love to see the Tax Cuts and Jobs Act extended," said Brian Kearns, a CPA and the founder of the financial planning and tax consulting firm Haddam Road.
Kearns said an extension would mean easier planning and lower rates for clients. "Will it happen? I honestly have no idea."
Here are the biggest changes that could be coming.
Baran said that taxpayers could be cautiously optimistic about an extension on the TCJA's reduced individual tax rates.
"The election has created a little more certainty. However, the challenges are still there," he said.
The table below compares tax rates and brackets under the TCJA and if the TCJA expires.
Another provision from TCJA that could save taxpayers money is the State and Local Tax deduction, known as SALT. That provision allows taxpayers in areas with high local taxes — such as prominent blue states like New York and California — to claim those taxes as a deduction.
The deduction was unlimited before the TCJA capped it at $10,000, meaning some high-income residents of those high-tax jurisdictions ended up owing more to the federal government after the law went into effect. That's drawn the ire of strange legislative bedfellows, with Democrats and Republicans in those blue states calling to roll back the cap. But there's already Republican dissent over how to tackle the cap, if at all.
Some Republicans — and Trump advisors — proposed raising the amount to $20,000, giving some relief to Americans paying a lot in local taxes. Trump himself has said he would "get SALT back."
But the cap may end up staying where it is. "It would be great if they raised it because there's a lot of people that are needing relief, but I can't tell you where that's going to head," Scott Brillhart, a partner and the director of tax at Founder's CPA, said.
The tax experts BI spoke with questioned how feasible proposals like eliminating taxes on tips, overtime, Social Security, and auto loans would be — all of which were talking points for Trump on the campaign trail. Brillhart said eliminating taxes on tips could be a "logistical nightmare for employers."
"I think it would be more complicated than the benefit it would be for a lot of this stuff," he said.
But Kearns said that the impact of reducing those taxes could be felt among a big slice of Americans.
"This matters a lot for all different segments of the population. You're younger, you're waitering or waitressing — no tax on tips, that's a big deal," Kearns said. "If you are receiving Social Security, that's a really big deal to not be paying taxes on your Social Security."
Another provision that could impact many Americans is the child tax credit. Parents could lose out on a $1,000 tax break if the TCJA expires this year. However, at least one Republican lawmaker — Sen. Josh Hawley of Missouri — is pushing a potential increase from $2,000 to $5,000. Vice-president-elect JD Vance also floated a $5,000 child tax credit on the campaign trail.
"You, of course, have to work with Congress to see how possible and viable that is," Vance told CBS's "Face the Nation."
Brillhart said that a higher child tax credit would be "very helpful" for many families and should be seriously considered.
Additionally, Americans interested in going electric may want to plug in now — at least if they want some tax benefits. Brillhart said that the tax credit of up to $7,500 for electric vehicles that President Joe Biden passed in 2022 could be on the chopping block.
"If that is a deciding factor for you to be purchasing an EV, I'm not telling them to go run out and purchase something, but it's something to consider," Brillhart said.
