Here is an overview of the key proposed changes:
1. Universal Baseline Tariff on Imports
A notable proposal involves imposing a universal baseline tariff on all U.S. imports. This measure aims to protect domestic industries by making imported goods more expensive, thereby encouraging consumers to buy American-made products. However, it could also lead to increased prices for a wide range of consumer goods.
2. Eliminating Taxes on Social Security Benefits
The administration proposes removing federal income taxes on Social Security benefits. This change would potentially increase disposable income for retirees, providing them with greater financial flexibility.
3. Tax-Free Overtime Pay
Under this plan, overtime earnings would be exempt from federal income tax. This initiative aims to reward employees who work extra hours, allowing them to retain more of their additional earnings.
4. Exempting Tips from Income Tax
This proposal seeks to make tip income tax-exempt, directly benefiting service industry workers who rely heavily on tips as a significant portion of their income.
5. Repealing the SALT Deduction Cap
The state and local tax (SALT) deduction cap, currently set at $10,000, limits the amount taxpayers can deduct from their federal taxable income. The proposal to repeal this cap would particularly benefit individuals in high-tax states, allowing for greater deductions and potentially lowering their federal tax liability.
6. Introducing an Auto Loan Interest Deduction
This plan proposes allowing taxpayers to deduct auto loan interest from their taxable income. Some talk has this deduction limited to US automobiles. Such a deduction could reduce the overall cost of purchasing vehicles, offering financial relief to car owners.
7. Increasing the Standard Deduction
Building upon the 2017 Tax Cuts and Jobs Act (TCJA), which significantly raised the standard deduction, there is a proposal to further increase these amounts. This change would simplify tax filing and reduce taxable income for many individuals, potentially lowering their overall tax burden.
8. Enhancing the Child Tax Credit
Expanding the Child Tax Credit is another proposal under consideration. This enhancement aims to provide additional financial support to families with children, reducing their tax liability and potentially increasing their disposable income.
9. Reducing Capital Gains Taxes
The administration is considering lowering tax rates on capital gains. This reduction would benefit individual investors and retirees by allowing them to retain a larger portion of profits from the sale of investments.
10. Transitioning to a Residence-Based Tax System
Currently, the U.S. taxes its citizens on worldwide income, regardless of where they reside. The proposed shift to a residence-based tax system would tax individuals based on their residency rather than citizenship, potentially alleviating tax burdens for U.S. citizens living abroad.
These proposals are part of a broader tax policy agenda and may evolve through the legislative process. For personalized advice and to understand how these changes might affect your financial situation, it is advisable to consult with a tax professional.
Tax Rescue CPA can guide you through the never ending tax policy changes keeping you on the right track for tax savings.
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