The expiration of President Donald Trump’s 2017 Tax Cuts and Jobs Act (TCJA) is set to occur by the end of this year, sparking discussions about potential impacts on American taxpayers. With the election of Donald Trump and the incoming Republican congressional majorities, significant changes could reshape tax policies. These alterations might affect individual tax rates, child tax credits, and deductions for electric vehicles, among other aspects.
Many provisions of the TCJA, which lowered individual tax rates and doubled the child tax credit, are nearing expiration. The proposed extensions and additions, such as eliminating taxes on tips and enhancing the child tax credit, are under consideration. This potential shift is causing ripples of cautious optimism among taxpayers. Mark Baran of CBIZ’s National Tax Office describes it as the ‘Tax Super Bowl’, emphasizing the importance of this legislative period for American wallets.
If the TCJA is extended, or if new provisions are added, such as removing taxes on tips, individual tax rates could remain low or decrease. A larger child tax credit, which increased from $1,000 to $2,000 per child under the TCJA, is also being considered for further expansion by Republicans. This would provide substantial relief to many families. However, as expert Brian Kearns points out, the feasibility of these changes remains uncertain.
A notable provision under the TCJA is the State and Local Tax (SALT) deduction, capped at $10,000. This cap has affected high-income individuals in high-tax states like New York and California, prompting bipartisan calls to raise it. Yet, disagreements persist, with some Republicans proposing to increase it to $20,000 while others suggest maintaining the current cap.
Eliminating taxes on tips and Social Security might prove challenging. Experts argue that while such proposals could significantly benefit younger workers and Social Security recipients, they could also pose ‘logistical nightmares’ for employers, as noted by Scott Brillhart of Founder’s CPA. The practicality of implementing these tax eliminations is still in question.
The potential changes to the child tax credit, especially increases proposed by figures like Sen. Josh Hawley and Vice-President-elect JD Vance, could profoundly affect parents across the country. An increase to $5,000 per child is suggested, but legislative collaboration is necessary to bring such plans to fruition.
Meanwhile, the tax credit for electric vehicles, introduced by President Biden, might face reductions or expirations. Those considering the purchase of an electric vehicle are advised to remain aware of these potential changes, though not to rush decisions based solely on impending policy shifts, as per Brillhart’s advice.
As the expiration of the 2017 TCJA looms, the potential for tax policy revisions under the new Trump administration is significant. While many taxpayers remain hopeful for extended or enhanced provisions, the outcomes depend greatly on congressional actions and negotiations. The discussions surrounding tax rates, child tax credits, and other deductions highlight the complexities and challenges inherent in reshaping tax policy during this critical legislative period.
Source: Businessinsider
