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Getting the right tax tips and tricks is imperative in the complex tax world we live in. The Kiplinger Tax Letter helps you stay up to date with the latest news and forecasts, with guidance from our highly experienced team (Get a (factor from The Kiplinger Tax Letter or subscribe). You can only get the full set of advice by subscribing to Tax Letter, however, we will publish regular excerpts online, and this is one of the examples. . .
Make no mistake: taxes fell on the agfinisha in the November elections and the stakes in tax matters are higher than usual. In fact, much of former President Donald Trump’s 2017 tax overhaul is set to expire at the end of 2025.
Most of the provisions affecting Americans and estates in the Tax Cuts and Jobs Act of 2017, such as lowering individual income tax rates, higher popular deductions, the top tax rate for child credits, the $10,000 limit on the state and local tax deduction, and the largest exemption from lifetime inheritance and gift tax automatically ends after 2025.
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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 take a look at how Donald Trump needs to approach this scenario and look at other tactics he needs to replace the existing tax system. I accumulated those proposals from speeches he gave during the crusade campaign, interviews he gave, his social media posts, the GOP 2024 platform, and other sources.
Above all, Trump wants to make the 2017 tax cuts permanent and pass more with even lower tax rates for individuals; He has not given details, such as whether he would reduce the tax rate. Current source of income tax of 37%.
Rumors abound that Trump would push for a top long-term capital gains rate of 15%, down from 20% now, but he hasn’t confirmed this. The Project 2025 initiative, discussed below, proposes a top 15% long-term capital gains tax rate.
Trump backs his election for vice president, J. D. Vance, to offer parents an additional $5,000 per child tax credit, 250 percent on top of existing tax credits of $2,000 per child.
Hotel and restaurant workers, as well as other tipped workers, would be blessed if Trump got what he wants. Proposes that tips 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 source of income tax on Social Security benefits. Under current law, Social Security beneficiaries pay taxes on up to 85% of their benefits, depending on the amount of their provisional source of income. Making Social Security benefits tax-free would be attractive to retirees, but it would also put a dent in Social Security’s acceptance fund, from which benefits are paid.
U.S. citizens living overseas might see tax changes under Trump. The U.S. taxes its citizens on their worldwide income, no matter where they reside. Expatriates can alleviate some of the sting of double taxation through foreign tax credits and other breaks, such as the foreign earned income exclusion and foreign housing exclusion.
Trump says he favors ending double taxation on Americans living abroad. We don’t know exactly what that means. An advocacy organization representing American expatriates has for years pushed a regime that would tax expatriates on the U. S. source of income but not on the foreign source of income. They also need the United States to prevent taxing the American source of income of expats living in countries that tax their American source of income.
At a crusade in Detroit, Trump proposed allowing Americans to deduct the interest they pay on auto loans. The non-public interest deduction was eliminated in 1986 and now Trump seems to want to partially repair it. It did not specify whether this proposed deduction would apply only to those indexed on Schedule A of the 1040, or whether it would convert it to a tax deduction above the line requested on page 1 of the 1040.
Trump says he would use tax incentives and tax credits to promote homeownership. And in an effort to influence voters in storm-damaged areas of the country, it is offering a tax deduction for the cost of turbines purchased between September 1, 2024 and August 31. 2025.
Surprisingly, it turns out that Trump needs to raise the $10,000 limit on the state and local tax deduction (SALT) or eliminate that limit entirely. Currently, taxpayers who itemize Form 1040, Schedule A can deduct their SALT deductions up to a maximum of $10,000. After 2025, unless lawmakers act, taxpayers will need to deduct the full amount of state and local taxes they pay, as they did before 2018.
Trump’s economic policy advisers oppose any increase to the $10,000 limit and urge Trump to lower the exchange limit or end the SALT deduction entirely. Meanwhile, several Democrats and Republicans on Capitol Hill in high-tax states such as New Jersey, New York and Illinois are pushing to raise the $10,000 limit.
Trump has floated the idea of eliminating the $10,000 limit, which would allow stores to fully deduct state and local taxes again. Trump’s move is a surprise, given that he was the one who signed the law in late 2017 that established the $10,000 limit. Removing the cap would provide disproportionate benefits to higher-income taxpayers and cost the government significant profits that Trump and Congress would like to use for other proposed tax cuts.
On estate taxes, the 2017 tax reform law nearly doubled the federal lifetime estate and gift tax exemption. The estate tax exemption is $13.61 million for people who die this year. After 2025, this figure will drop, reverting to the 2017 amount, adjusted for inflation. That’s about $7 million.
The more sensible estate tax rate of 40% was not replaced in the 2017 law. Given that Trump says he needs to make the tax cuts in the 2017 law permanent, we believe this promise would also come with a superior exemption from gift and life estate tax. It remains to be seen whether Trump needs more easing.
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 said he needs general price lists of 10% (or 20%) for imported goods and price lists of 60% for goods imported from China. Although price lists would increase U. S. government revenues, they would also lead to higher costs of goods for consumers.
Trump needs to maximize the blank power tax credits for businesses and individuals, which were passed under the Inflation Reduction Act of 2022.
It would recover a repayment of one hundred percent of the bond in the first year and allow for higher spending. And it would allow corporations to claim tax deductions for studies and progression in the year in which expenses are incurred, rather than requiring corporations to amortize prices over five years. years (or 1five years).
When Trump was president, he promised to end the “Johnson Finish. “And he reiterated this desire in the electoral crusade for the 2024 elections.
This 70-year-old federal tax law prohibits churches, charities, and other 501(c)(3) exempt organizations from engaging in or intervening in political campaigns, either for or against a candidate running for office. Republican lawmakers have been trying for years to get rid of this statue, but to no avail.
We can’t talk about Trump’s tax proposals without also mentioning Project 2025. This policy project, designed for the next Republican administration, was led by the Heritage Foundation and includes a list of proposals desired by conservative-leaning think tanks Array.
There is a lot about taxes, the following proposed changes:
This was first seen in Kiplinger’s tax letter. It helps you navigate the complex world of taxation by keeping you up to date with new and ongoing adjustments to tax laws, offering tips for reducing your business and individual taxes, and predicting what the White House and Congress might do about taxes. Get a free portion of The Kiplinger Tax Letter or subscribe.
Joy is an experienced tax attorney and CPA with an L. L. M. in Taxation from New York University School of Law. After many years working for giant law and accounting firms, Joy saw the light and now puts her education, legal experience, and extensive knowledge of federal tax law to work writing for Kiplinger. He writes and edits The Kiplinger Tax Letter and contributes articles on federal taxes and retirement to kiplinger. com and Kiplinger’s Retirement Report. His articles have been picked up through the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, television and radio to discuss federal tax developments.