6 Changes Coming to Your Tax Return in 2025 If Trump Is Elected President
Since former President Donald Trump enacted the Tax Cuts and Jobs Act of 2017, most Americans have benefited from lower taxes. However, some of those tax provisions will sunset in 2025.
Read Next: I’m an Economist: Here’s What a Trump Win in November Would Mean for the Tax Burden on the Poor
Find Out: 7 Reasons You Should Consider a Financial Advisor — Even If You’re Not Wealthy
If Trump is reelected this November, many, if not all, of these provisions will be extended or put in place permanently. Additional tax changes could impact everyone, from low-income earners to the wealthy. Here’s an overview of how your tax return could be affected if Trump is elected president again.
Earning passive income doesn't need to be difficult. You can start this week.
Extension of the Tax Cuts and Jobs Act (TCJA)
If Trump is elected to a second term, Americans can expect the extension of most provisions from the Tax Cuts and Jobs Act. Instead of tax brackets being rolled back to previous levels and the standard deduction being lowered, these things would stay the same, meaning the tax benefits many people have enjoyed the past few years will continue.
It’s also believed that Trump could push things more by reducing income tax levels even further and bumping the standard deduction amounts even higher.
“If Trump pushes to extend these provisions beyond their current expiration in 2025, individuals could continue to benefit from lower tax rates and higher standard deductions,” said Dennis Shirshikov, head of growth at GoSummer.com. “An extension of these provisions would provide short-term tax relief but might also contribute to long-term fiscal challenges for the federal government.”
Reduced Taxes on Capital Gains for the Wealthy
The Net Investment Income Tax (NIIT) is an additional tax on wealthy investors that helps fund the Affordable Care Act. This tax only applies to Americans with the following modified adjustable gross incomes:
Single Filers: $200,000 and above
Married Filing Jointly: $250,000 and above
Married Filing Separate: $125,000 and above
Trump will likely introduce a plan to eliminate this 3.8% tax, which would help reduce taxable income for wealthier Americans.
“Eliminating this surtax would lower taxes for high-income individuals, especially business owners, with investment income,” said John F. Pace, CPA, tax manager and partner at Pace & Associates CPAs. “Those with modified adjusted gross income over $200,000 ($250,000 married filing jointly) would avoid paying this additional 3.8% tax on capital gains, dividends, interest, annuities, royalties, and rents.”
Reintroduce Certain Deductions and Credits
Several tax deductions and credits were eliminated as part of the Tax Cuts and Jobs Act. Trump wants these reinstated, which could add even more money to taxpayers’ pockets when they file in 2025.
“He (Trump) might advocate for restoring the full deductibility of unreimbursed employee expenses, which were previously available under the old tax code but limited by the TCJA,” said Shirshikov. “This change would particularly benefit employees who incur significant out-of-pocket expenses related to their jobs. Additionally, Trump could push for enhanced child tax credits or other family-oriented tax benefits, aiming to provide further financial relief to middle-class families. These adjustments could ease the financial burden for many taxpayers but would also necessitate careful consideration of the broader economic implications.”
Potential of Family Savings Plans
Trump has stated that he wants family savings to be a focus in the future. Project 2025 — run by former Trump officials in order to promote right-wing policies if Trump is elected — plans to establish a “universal savings account.” These would act much like a Roth IRA, where earnings could be withdrawn tax-free after reaching age 59.5. However, the biggest difference is that they could be used for virtually any expense, and they would have a much higher $15,000 annual contribution limit.
“Trump has already indicated an interest in promoting family savings,” said Ben Johnson, financial advisor and founder of Financial Ben. “One good way to do this would be the introduction of a family savings plan with tax advantage so that accounts can be set up for families’ many expenses, such as education, health, and child care.”
Many experts are split on how beneficial this would be for most Americans. Many are struggling to save enough money for retirement after covering their monthly expenses. It’s easy to see why a universal savings plan might be most beneficial to higher earners who have more money to save, but it could go unused by anyone else.
Adjustments to Capital Gains Tax Rates
Project 2025 also proposes reducing capital gains taxes from their current 20% level to 15%. This would have a disproportionate benefit for the wealthiest investors since anyone making under $47,025 already pays 0%, and anyone making between $47,026 and $518,900 is already paying a capital gains tax of 15%. However, for those making over $518,900 with a substantial amount of investment income, this could have a major impact on your future tax returns.
“Trump has previously suggested lowering the capital gains tax rate to stimulate investment and economic growth,” Shirshikov added. “Reducing the long-term capital gains tax rate from the current 20% to a lower percentage could incentivize more investments in stocks, real estate, and other capital assets. While this might boost economic activity and market investments, it could also exacerbate income inequality by disproportionately benefiting higher-income individuals who are more likely to have substantial capital gains.”
Retirement Contribution Limit Increased
Trump could also choose to increase the amount you can save annually in retirement accounts, such as IRAs and 401(k) plans. Not only would this improve how much you could save for retirement, but depending on the savings product, it could lower your taxable income.
“For instance, an increase in the 401(k) contribution limit, currently set at $22,500, to a higher value of $25,000 would help individuals defer more income,” added Johnson. “The result would be a reduction in current tax burdens and an increase in retirement savings.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out: I’m Voting for Harris: Here’s What I Want To See Her Do for the Economy.
More From GOBankingRates
6 Things to Try This Week if You're Behind on Your Savings Goals
4 Reasons Retired Women Need More Money Than Men -- And What To Do About it
This article originally appeared on GOBankingRates.com: 6 Changes Coming to Your Tax Return in 2025 If Trump Is Elected President