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Make no mistake about it. Taxes are on the ballot in the November elections, and the tax stakes are higher than usual. That's because much of former President Trump's 2017 tax reform legislation is expiring at the end of 2025. Most of the provisions impacting individuals and estates, such as the lower individual income tax rates, higher standard deductions, higher child tax credit, the $10,000 cap on deducting state and local taxes, and the larger lifetime estate and gift tax exemption, are slated to end automatically, after 2025. Unless lawmakers act, those provisions will revert to the rules that were in effect for 2017. With the help of Congress, the next president will have to confront these expiring tax provisions.
Let's see how Donald Trump wants to deal with this as well as look at other ways he wants to change the current tax system. I've pulled together these proposals from speeches he has made on the campaign trail, interviews he has given, his social media posts, the 2024 GOP Platform and other sources.
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Trump's tax plans for individuals
- First and foremost, Trump wants to make the 2017 tax breaks permanent and take it further with even lower tax rates for individuals.
- Trump supports his Vice Presidential pick J.D. Vance's idea to give parents a higher child tax credit of $5,000 per child, a 250% increase from the current $2,000-per-child tax credit.
- Hospitality and restaurant workers would get a boon if Trump has his way. He's proposing that tipped income be tax-free.
- Another group that Trump wants to benefit is workers with overtime pay. He said at a rally that he supports making overtime pay nontaxable.
- Trump has also proposed abolishing the income tax on Social Security benefits. Under current law, Social Security recipients are taxed on up to 85% of their benefits, depending on the amount of their provisional income. Making Social Security benefits nontaxable would appeal to retirees, but would also put a big dent in the Social Security trust fund, from which benefits are paid.
- Trump says he would use tax incentives and tax credits to promote homeownership.
- The $10,000 cap on deducting state and local taxes: Presently, taxpayers who itemize on Schedule A on Form 1040 can deduct their state and local tax deductions up to a $10,000 cap. After 2025, unless lawmakers act, taxpayers would be able to write off the full amount of state and local taxes that they pay.
Trump's economic policy advisers oppose any increase to the $10,000 cap and are urging Trump to lower the monetary cap, or eliminate it, instead. Meanwhile, a number of Capitol Hill Democrats and Republicans from high-tax states are pushing for an increase to the $10,000 cap. Trump has not yet indicated how he would handle this tax break.
Business taxes
- On business taxes, Trump supports dropping the current 21% corporate income tax rate to 20%. He also said he would drop it further to 15%, but only for corporations that make their products in the U.S. Trump hasn't provided details on how this would work.
- Trump has often said he wants a 10% (or 20%) across-the-board tariff on imported goods and a 60% tariff on goods imported from China. Although the tariffs would raise revenue for the U.S. government, they would also cause the prices of goods to go up for consumers.
- Trump wants to eliminate most of the clean-energy tax credits for businesses and individuals that were enacted under the 2022 Inflation Reduction Act.
- He would allow businesses to claim research and development tax deductions in the year the expenses are incurred, rather than requiring firms to amortize the costs over 5 years (or 15 years).
- And he would bring back 100% first-year bonus depreciation and allow more expensing.
Tax-exempt organizations
When Trump was president, he promised an end to the "Johnson Amendment." And he has been repeating that vow again on the campaign trail ahead of the 2024 elections.
This federal tax statute, which has been on the books for 70 years, prohibits churches, charities and other 501(c)(3) exempt organizations from participating or intervening in political campaigns, either for or against a candidate running for office. Republican lawmakers have tried to get rid of this statue for years but to no avail.
Project 2025
We can't talk about Trump's tax proposals without also mentioning Project 2025. This policy blueprint, which was designed for the next Republican administration, was spearheaded by the Heritage Foundation and includes a wish list of proposals desired by conservative-leaning think tanks. There's a lot in there on taxes, including the following proposed changes:
- Two individual income tax rates of 15% and 30%, with the 30% rate starting at about $170,000
- 15% maximum capital gains tax rate with annual inflation indexing of capital gains
- Repeal of the 3.8% net investment income tax (NII) on high earners
- Allow everyone to contribute up to $15,000 a year to a universal savings account, with tax-free withdrawals of gains at any time for any purpose
- Eliminate most tax deductions, tax credits and exclusions, including the state and local tax deduction that itemizers claim on Schedule A of their 1040
- Lower the corporate tax rate to 18%
- Let businesses expense assets with no limits
This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.
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