Donald Trump's Tax Bill: The Unfinished Agenda
Trump's Financial Reforms: Updates on the Ambitious Tax Legislation and Anticipated Tax Implications in 2025 and Beyondward
President Trump's Tax Code Crusade
Since his appointed time, President Trump has made no bones about his intentions to reshape the U.S. tax code. Seeking sweeping reforms from extending the tax cuts he signed into law in 2017 to abolishing taxes on tips, overtime pay, and more, he has pushed tax changes into the American spotlight. Now, Republicans in Congress are scrambling to bring his vision to fruition.
The Unveiling of the Tax Proposal
On Monday, House Republicans released a 389-page bill that builds upon the existing tax rates and provisions of the Tax Cuts and Jobs Act, which would otherwise expire at the close of this year. This mammoth document contains a range of tax benefits, many of which take effect for the current tax year — 2025 — and then phase out four years later.
- Raise the standard deduction for seniors over 65 by an extra $4,000, effective from 2025 to 2028. This enhancement, however, will gradually decrease for individuals earning over $75,000 and couples with incomes higher than $150,000.
- Eliminate taxes on tips and overtime pay starting from 2025 until 2028. Although the suggestion to scrap Social Security taxes, a favorite topic of Trump, is absent from the proposal, the increased standard deduction for seniors is seen as an alternative means of alleviating the tax burden for older Americans.
- Boost the child tax credit to $2,500 from its current $2,000, lasting from 2025 to 2028. Thereafter, the child tax credit would return to $2,000.
- Permanently extend the beloved 20% qualified business income deduction for pass-through entities such as S corporations, partnerships, and sole proprietorships.
- More than double the current $10,000 cap on the state and local tax deduction, raising it to $30,000. This figure is considerably lower than what some moderate Republicans would prefer, setting the stage for intense negotiations as the bill moves forward.
- Abolish the electric vehicle tax credit as of 2025, with the exception of manufacturers yet to sell 200,000 vehicles.
- Introduce a car loan interest deduction, available to both itemizers and non-itemizers, from 2025 to 2028. This incentive will gradually disappear for individuals with a single income of $100,000 or more and couples making over $200,000.
- Establish a deduction for charitable contributions valuing up to $150 for single filers and $300 for married couples, for 2025 through 2028.
Proposed by Trump for 2026
Standard Deduction: Pros and Cons
39.6%
The bill lacks any inclination towards a hike in taxes for the wealthiest Americans, retaining the highest rate at 37%. This contrasts with previous reports that Trump had requested House Speaker Mike Johnson to incorporate a new tax rate of 39.6% for high-income earners. Here are the top tax rates for singles and married taxpayers in recent years:
$2.5 million
| Year | Highest Income Tax Rate | Single Filer | Married Filing Jointly || --- | --- | --- | --- || Proposed by Trump for 2026 | 39.6% | $2.5 million | $5 million || Current for 2025 (and extended in the proposed bill) | 37% | $626,350 | $751,600 || 2017 (before TCJA) | 39.6% | $418,400 | $470,700 |
$5 million
The Road Ahead for the Tax Bill
House Speaker Mike Johnson has expressed a desire to hold a vote on the tax bill by Memorial Day; however, consensus among lawmakers may not be reached by that date. Following the House's approval of the bill, it will head to the Senate. Trump himself has expressed a preference for a final bill to be signed into law by July 4.
Current for 2025 (and extended in proposed bill)
The House's bill portion will cost approximately $4 trillion over the following decade, according to a report from the Joint Committee on Taxation. This cost estimate aligns with the budget blueprint lawmakers agreed upon earlier this year.
37%
Republican lawmakers are expected to extend many (if not all) of the expiring provisions of the Tax Cuts and Jobs Act as long as they remain in charge. However, divergences within the Republican party over how to fund these tax cuts are a significant hurdle, making the process of passing the House bill, then reconciling it with the Senate's version a complex task.
$626,350
Potential Changes on the Horizon
$751,600
Though it remains unclear what the final law will ultimately look like, the likelihood of tax-law overhaul in 2021 is high.
The Tax Cuts and Jobs Act brought key changes to individual taxes, such as nearly doubling the standard deduction, increasing the child tax credit to $2,000, reducing the top tax rate for high-income earners to 37%, and introducing a new 20% deduction for specific business income.
2017 (before TCJA)
While some of these TCJA provisions were made permanent, others have been set to expire at the end of 2025. Congress has the flexibility to include virtually any tax provision they wish in a comprehensive tax bill — given it can secure passage.
39.6%
As a result, extending the TCJA's expiring provisions could maintain the status quo for American taxpayers, with the possibility of additional tax changes also on the table.
$418,400
During his presidential campaign and tenure, Trump has promised a host of taxes breaks, such as:
$470,700
- Eliminating taxes for those earning less than $150,000.
- Removing the current $10,000 cap on the deduction for state and local taxes.
- Abolishing taxes on tips, overtime pay, and Social Security benefits for retirees.
- Introducing a tax deduction for car loan interest payments on American-made cars.
With key provisions still under debate, including the state and local tax deduction cap, here are some other possible changes for the upcoming years:
1. Tax Benefits for Small Businesses
The TCJA lowered the corporate tax rate for businesses to a flat 21%, which is not part of the TCJA's expiring provisions (though any tax law is theoretically open to modification by lawmakers).
The TCJA also offered a significant tax break to pass-through businesses, such as partnerships, S corporations, and sole proprietors: If these businesses meet income limits and eligibility requirements, they can deduct 20% of their qualified business income, or QBI — a substantial tax break for qualifying businesses. This provision is slated to expire at the end of 2025 but appears in the Republican bill.
2. State and Local Taxes (SALT) Cap
To offset the costs of the TCJA, lawmakers eliminated personal exemptions and capped the amount taxpayers could claim for the state and local tax (SALT) deduction at $10,000. The SALT deduction enables taxpayers to write off their property taxes, in addition to their state and local income or sales taxes.
Trump had campaigned for removing the SALT limit. Other suggestions that had been floated by lawmakers included raising the cap to $20,000 or doubling the amount for couples who are married filing jointly. The Republican proposal currently raises the cap to $30,000.
Lifting the cap or even increasing it would raise questions about how to fund the extension of other TCJA provisions.
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- In the midst of Donald Trump's ongoing agenda to transform the U.S. tax code, this push extends to various areas of business, finance, politics, and general-news, with a recently unveiled tax proposal seeking modifications in areas such as business tax deductions, individual tax benefits, and changes in taxation related to tips and overtime pay.
- The proposed tax bill, built upon the Tax Cuts and Jobs Act, also addresses issues of broader political interest, such as the state and local tax (SALT) cap, an issue Trump had campaigned for in his presidency, but one that raises questions about funding for other tax provisions.
