Eight Groups Who Can Expect New Tax Breaks Under Trump

The president-elect has promised many additional tax credits and deductions. Are you among those who would benefit from them?

Donald Trump’s biggest campaign promises included extending the tax law he signed in 2017, which lowered many Americans’ income taxes. But he also promised to “pursue additional tax cuts” if elected. Now that he’s headed back to the White House, you might be wondering — even if you didn’t vote for him — whether you stand to benefit from those new tax breaks.

So, we’ve broken down the additional federal income tax breaks that were part of Trump’s official campaign platform or that he promised while on the campaign trail. As it turns out, virtually every taxpayer in America would benefit if Trump delivers on all these breaks.That’s a big “if,” of course, but the former president happens to have a track record of making good on promises to slash income taxes.

Read on to learn more about his newly promised tax breaks — and what it would take for Trump to pull them off during his second term.

1. Restaurant And Hospitality Workers

The promised tax break: “We will eliminate Taxes on Tips for millions of Restaurant and Hospitality Workers …” — Trump’s official platform posted to his campaign website

How it might work: While Vice President Kamala Harris also promised to “eliminate taxes on tips for service and hospitality workers,” Trump was the first 2024 presidential candidate to make this promise. Neither of them got into much detail about exactly which tip earners would benefit, though.

Trump’s official platform simply said “restaurant and hospitality workers.” So, it’s unclear whether other types of tip-earning workers — from hair stylists to Uber drivers — could also exempt their tip income from taxes.

Also unclear are the types of taxes from which tips would be exempt. Trump’s platform was no more specific than “taxes,” which could mean he’d either:

• Exempt tips from just income taxes.
• Exempt tips from both income taxes and payroll taxes.

If Trump does exempt tips from payroll taxes, that would hasten the insolvency of the Social Security and Medicare programs, as they are funded in large part by payroll taxes. An analysis by the Committee for a Responsible Federal Budget found that exempting tips from payroll taxes would reduce federal revenue by anywhere from $100 billion to $550 billion over 10 years.

2. First-Time Homebuyers

The promised tax break: “To help new home buyers, Republicans will … promote homeownership through Tax Incentives and support for first-time buyers.” — Trump’s official platform

How it might work: At this time, we can only guess how this tax break would work. Trump’s promise didn’t include a dollar value for it, nor did it specify whether it must be repaid, as was the case the last time around.

The federal government last offered a tax break to first-time homebuyers in 2008-2010. Signed into law by then-President Barack Obama, it was a tax credit worth up to $8,000. Recipients had to repay the credit, though, so it was more like a tax-free loan than a true tax credit. To this day, some folks are still repaying the credit.

3. Caregivers

The promised tax break: “Republicans will … support unpaid Family Caregivers through Tax Credits …” — Trump’s official platform

How it might work: This pledge didn’t specify a dollar value, either. Trump is not the first to promise a tax break for unpaid caregivers, though, so we can look to similar promises to get a sense of how much Trump’s proposed credit might be worth.

One recent iteration out of the GOP is the Credit for Caring Act, federal legislation that was introduced by Rep. Mike Carey (R-Ohio) in early 2024 but stalled shortly thereafter. It calls for a tax credit worth up to $5,000 toward the cost of long-term care expenses incurred by folks who serve as caregivers to loved ones while also trying to hold down a job.

Another thing we don’t know about Trump’s proposed tax credit: whether it’d be refundable or nonrefundable. With a refundable tax credit, everyone who is eligible for it receives money back on their taxes.

With a nonrefundable credit, even folks who are otherwise eligible for it only receive money back if they have a tax obligation. In other words, if you are due a tax refund for a given tax year, instead of owing the IRS a balance for that year, a nonrefundable credit would effectively be worthless to you.

4. Overtime Workers

The promised tax break: “As part of our additional tax cuts, we will end all taxes on overtime.” — Trump’s Sept. 13 speech during an Arizona campaign rally

How it might work: “All taxes” implies that this promise would eliminate both income taxes and payroll taxes on overtime pay. While that might sound great to anyone who works overtime hours, it’s bad news for current and future Social Security and Medicare recipients.

An analysis by the Committee for a Responsible Federal Budget found that if Trump exempted both tips and overtime pay from payroll taxes, it would reduce federal revenue by a total of roughly $900 billion over 10 years.

Separately, the Tax Foundation argued that exempting OT pay from taxes “would significantly distort labor market decisions,” as we detailed in “6 Radical Ways Trump and Harris Are Promising to Change Taxes.”

5. Social Security Recipients

The promised tax break: “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” — July 31 post to Trump’s Truth Social account

How it might work: Trump’s pledge to end the taxation of Social Security retirement benefits would mean lower taxes for the roughly 40% of recipients who, according to the Social Security Administration, currently owe federal income taxes on their benefits. This change would be a double-edged sword, however, giving to current Social Security recipients while taking away from future recipients.

It would advance the insolvency date for Social Security’s retirement trust fund by more than a year, according to the Committee for a Responsible Federal Budget. In other words, that trust fund would run dry — and future Social Security recipients would therefore face benefit cuts — sooner than is currently projected.

6. Car Loan Holders

The promised tax break: “I am announcing that as part of our tax cuts, we will make interest on car loans fully deductible.” — Trump’s Oct. 10 speech to the Detroit Economic Club

How it might work: Here’s one big thing we do know about this tax break: “fully deductible.” That means that if you are eligible for the deduction, you could write off all the interest you pay on car loans — a sweet deal for those who are eligible. But there’s one big thing we don’t know about this deduction: whether or not it would be an itemized deduction — which directly affects who can qualify for it.

Itemized deductions are only available to taxpayers who itemize their tax deductions rather than claiming the flat-amount standard deduction — and only around 12% of taxpayers itemize. So, if Trump’s car loan interest deduction is an itemized deduction, it would effectively be worthless to around 88% of taxpayers.

7. Homeowners

The promised tax break: “I will … get SALT back” — Sept. 17 post to Trump’s Truth Social account

How it might work: “SALT” refers to the state and local tax (SALT) deduction, a federal tax break that enables folks to write off taxes they paid to their state and local governments if they itemize. (It’s one of those itemized deductions and thus only available to those who itemize their federal tax deductions rather than claiming the flat-amount standard deduction.)

Prior to 2017, the value of the SALT deduction was unlimited, but the tax law that Trump signed in 2017 capped its value at $10,000. So, by “get SALT back,” Trump presumably means he would remove or at least increase the cap on the SALT deduction. That would make the deduction more valuable for folks who pay more than $10,000 a year in state and local taxes — which isn’t uncommon in states with high property taxes, such as New Jersey and Illinois.

8. Americans Living Abroad

The promised tax break: “Once and for all, I’m going to end double taxation on our overseas citizens.” — Trump’s Oct. 12 YouTube video

How it might work: Currently, an American living abroad is likely to end up paying income taxes to both the U.S. and the county in which they live. So, Trump’s pledge to end this double taxation would presumably relieve Americans living in other countries of their tax obligations to the IRS.

Can Trump Really Pull All This Off?

Trump campaigned on tax-related promises back in 2016 and accomplished many of them during his first term. So, he’s already proven he can do this. The hitch is that he can’t do it alone.

Federal income taxes and payroll taxes are both matters of federal law. So, changing these taxes — such as by creating new tax breaks — requires new laws. That means Congress would have to write and pass a new tax bill before Trump could sign it into law.

The odds of Congress pulling that off depend on who has control of the Senate and House in 2025. When Trump took office in 2017, both chambers were Republican-controlled. As of this writing, Republicans had gained control of the Senate in the Nov. 5 elections, but House races had yet to be called for us to know which political party will control the House in 2025.

 

Source: MoneyTalksNews