Trump’s 2025 Tax Plans: Experts Weigh In On What Could Happen

One of the key proposals from President Donald Trump’s 2025 campaign centers around adjusting how individuals and businesses are taxed.

During his first term, Trump enacted major tax reforms with the Tax Cuts and Jobs Act (TCJA) of 2017. Now, with the potential to build on these changes, Trump’s administration faces the opportunity to shape the tax code further. Many provisions from the TCJA are set to expire at the end of 2025, paving the way for additional modifications.

Several of Trump’s tax plan proposals could bring drastic shifts to the current tax structure. Here are six predictions from some of the country’s top tax experts and economists on what could lie ahead.

1. Extending the Tax Cuts and Jobs Act

The TCJA introduced a flat 21% corporate tax rate, increased the standard deduction, raised the child tax credit, and placed a $10,000 cap on state and local tax (SALT) deductions.

Spencer Carroll, CPA and account executive at Gelt Financial, explains, “If Congress doesn’t act, taxes will rise and the standard deduction will drop. But with Trump back in office, it’s likely many of the TCJA’s provisions will be extended.”

However, Trump’s proposal also includes the potential repeal of the SALT cap, which has been especially burdensome for high earners in high-tax states. But as Richard McWhorter, a certified financial planner, warns, extending these tax cuts could increase inflation and national debt, ultimately raising living costs for many Americans.

2. Exempting Certain Types of Income From Taxation

Under Trump’s plan, certain types of income, such as overtime pay and tips, would be exempt from taxation. This could benefit hourly workers and those who rely on gratuities. Romeo Razi, CPA and founder of TaxedRight, notes that this change could provide relief to low-income individuals, who typically face higher tax burdens. The proposal also calls for eliminating taxes on Social Security benefits, which would have major implications for the Social Security trust funds.

“A more balanced approach, such as a means test, might be more feasible than an outright tax exemption,” Razi suggests.

3. Reducing Corporate Taxes

Trump’s push for lowering corporate taxes is backed by Mark Pingle, an economics professor at the University of Nevada. He argues that reducing business taxes would lower prices for consumers and make it easier for lower-income people to afford goods and services. Although tax hikes on businesses may be politically appealing, Pingle cautions that higher corporate taxes ultimately lead to higher consumer prices and disproportionately hurt the poorest Americans. He suggests completely eliminating corporate taxes in favor of consumption-based taxes.

4. Replacing Federal Income Tax With Tariffs

Trump has proposed eliminating the federal income tax entirely, replacing it with higher tariffs on imported goods. While tariffs can serve strategic purposes, Pingle warns against relying on them as a primary revenue source, suggesting that they should be used more as a tool for promoting domestic production and protecting against adversarial nations.

5. Potentially Less Aggressive Auditing and Enforcement

Trump’s tax plan could result in reduced auditing and enforcement by the IRS. According to Noah Rosenfarb, CPA and founder of Wealthrive, this could alleviate the anxiety many Americans feel about audits. However, Rosenfarb advises caution, reminding taxpayers not to take advantage of potential leniency when planning their tax strategies.

6. Simplifying the Tax Code

Christina Taylor, vice president of tax development at the tax software firm April, advocates for simplifying the tax code, something Trump attempted during his first term. However, she notes that his attempt to create a one-page 1040 form resulted in more forms and more complexity. Real simplification of the tax code would help both taxpayers and tax professionals navigate it with more confidence. Taylor remains hopeful, but skeptical, that meaningful reform will occur.

How Likely is Trump’s Full Tax Plan to Be Enacted?

Despite Trump’s ambitious tax proposals, experts remain divided on how much of his plan will actually pass. Lou Barberini, CPA and tax journalist, notes that with a narrow majority in Congress and the growing national debt, Trump may face significant obstacles in pushing through sweeping tax cuts. The national debt, now surpassing $36 trillion, could lead to higher interest rates and make further tax reductions difficult to justify. While Trump’s full tax overhaul may be unlikely, some adjustments are expected.

Richard McWhorter expresses cautious optimism, saying, “We’re all hopeful that whatever policies are implemented will better our country. We all benefit if it works.”

 

Source: U.S. News & World Report