Will we see more tax breaks next year? Who Benefits From Trump’s Tax Plan?

The newly elected President of the United States, Donald Trump, said promised some radical changes in tax policy In the United States, including elimination of Social Security taxes and income tax on tips.

Households across the income spectrum in the United States will benefit greatly from these tax changes in the short term, a A report from the University of Pennsylvania shows. These tax breaks will add $5.8 trillion to the federal debt over the next ten years.

“There will be some winners and losers in the next round,” he said Ryan LoseyHe is a certified public accountant and executive vice president at PIASCIK accounting firm.

We will not see these changes in time next year’s tax returnbut some proposals could affect paychecks early next year, experts say. Like us go into tax seasonHere’s what you need to know about Trump’s tax plan and how it could affect your paycheck to return.

Trump’s tax proposals that could save you money

Here are some of Trump’s proposed tax changes that could add money to your paycheck or reduce your tax burden.

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💰 Eliminate Social Security taxes

Most people nowadays Social security recipients pays 50% to 85% of these benefits in tax on income (the rate depends on your total gross income, including other sources).

Trump suggested Exclusion of Social Security benefits tax from income taxes. If you collect Social Security benefits checks or will receive them soon, this will increase the amount you receive, which can help you better cover retirement costs. Jackets BowmanIRS registered agent.

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If you don’t pay taxes on your SSI benefits, this proposed tax break won’t benefit you. Single taxpayers Earn less than $25,000 ($35,000 for joint filers) Pays no tax on Social Security benefits.

This would help seniors in the short term, but some experts worry about the long-term effects of this tax break. Taxes on Social Security benefits are paid to the Department of Social Security. They are It is not used to fully fund the benefits you receivetherefore, eliminating taxes could hurt the program overall.

The fund that covers Social Security benefits is expected to run out of money in the next decade. If the taxes are repealed, the fund will be depleted sooner and could become bankrupt in early 2032 rather than late 2033. Research from the Committee for a Responsible Budget. The The Tax Foundation also estimates This change alone would increase the federal deficit by $1.6 trillion over ten years.

Note: This tax cut will not affect the Social Security payroll tax employees pay. Anyone who earns income outside of Social Security benefits will still pay into the Social Security Fund.

🕚 Eliminate taxes on overtime payments

If you work overtime, you currently pay income tax on your overtime pay. One from Trump campaign offers promised to end taxes on overtime pay.

Overtime pay is taxed at your normal time income tax rate. When you receive overtime pay, your total pay is greater and this affects your total tax contribution. A higher salary can push you into a higher tax bracket and change your overall tax rate. If this proposal were to pass, it is likely that overtime would be exempt from the ordinary income tax rate.

Eliminating taxes on overtime pay can significantly increase your wages. Bowman believes it could also eliminate uncertainty about overtime.

Tax Fund predicts The change would cost the federal government $680 billion over 10 years, but the exact number depends on how the change is implemented.

💵 Stop paying taxes

Another potential economic relief for workers Trump’s proposed tax repeal tips. The idea is that any income service workers will receive as tips will no longer be subject to income tax.

Service workers must report and pay taxes on any cash tips they currently earn. If you earn most of your income from cash tips, this tax change could reduce your tax burden.

This tax change may have an additional positive side: it may encourage more workers to report their income accurately without fear of tax. This can give the government a more accurate picture of their earnings, which can help workers later because benefits like Social Security are calculated based on lifetime reported earnings.

💲 Make the Tax Cuts and Jobs Act permanent

The Tax Cuts and Jobs Act is Trump’s signature tax cut from 2017. Law made tax declaration easier by lowering overall tax rates for many Americans. Most of the provisions are set to expire in 2025, but the president-elect has proposed making them permanent.

Keeping the TCJA in place would keep taxes low for many households and businesses. Some of the notable tax benefits under the TCJA include:

• Lower individual tax brackets for multiple filers.
• Increasing the standard deduction claimed by most filers.
• Extended Child Tax Credit (up from $1,000 to $2,000).

The TCJA also made tax planning a little easier. “This is a simplification of the tax system,” Bowman said. “We’re all used to it.”

If the TCJA ends as currently planned, many Americans can expect their tax debts to increase. According to the Tax Foundation. Making the TCJA permanent will be costly the federal government about $3.7 trillion.

👶 Expand the Child Tax Credit

In addition to higher Child Tax Credit Under the TCJA, there is a maximum, elected vice president JD Vance also suggested expanding the tax credit to $5,000 per child. A larger CTC could help reduce tax burdens for millions of families.

Under the TCJA, which expires at the end of 2025, the Child Tax Credit is limited to a maximum of $2,000 per child. If this law is not extended, the CTC will drop to a maximum of $1,000 per child.

In 2021, President Joe Biden’s administration temporarily expanded the Child Tax Credit to $3,000 to $3,600 per child as part of the Save America Act. This expansion has significantly affected millions of families and brought it down the level of child poverty has reached a record high. The expanded CTC was able to lift nearly 3 million children out of poverty and reduce malnutrition. According to a Boston University study. An increase of $5,000 per child could provide much-needed relief for millions of families.

it is not clear The Trump administration will push for an expanded CTC. If so, the legislation would require Congressional approval. The last attempt to extend the CTC was made in August 2024, but It lost the necessary votes in the Senate 48:44. Only three Republican senators voted in favor of the expanded CTC, and Vance abstained from voting on the proposal.

Like other tax credits, expanding the Child Tax Credit would lead to larger federal deficits.

Tax cuts are in jeopardy after Trump takes office

Trump has proposed a variety of tax cuts and credit extensions, but experts say there are some tax breaks that Trump is unlikely to support — specifically, the clean energy tax breaks.

During the campaign, Trump said he would consider dissolving the Biden administration Inflation Reduction Act. Doing so would require authorization from Congress, but some clean energy tax credits could disappear if the administration is successful.

The $7,500 tax credit for electric vehicles is in danger. Trump’s said they would eliminate the transition group This is a tax break. The fate of other clean energy tax credits, such as the Solar Tax Credit and home energy efficiency tax credits, is less clear.

In addition, the federal tax avoidance provision on forgiven student loans will expire at the end of 2025. Experts do not expect the Republican White House to extend this law.

What does Trump’s tax plan mean for you?

In general, expect tax rates to remain low under the new Trump administration. You may receive additional tax credits on Social Security and tip income, but you may also lose energy efficiency tax credits.

Experts do not expect many changes before then 2025 tax seasonhowever, possible new extensions to Child Tax Credit or other tax benefits may affect your payment next year. Many of the incoming Trump administration’s tax proposals will take time to implement because they will require congressional approval.

We will notify you of any new tax changes that may affect your tax bill or refund.