President Trump won the election with impunity. Not only did he win the electoral college and popular vote, but he also has a clear majority in the Senate, and, at the time of this writing, it looks like the Republicans are going to control the House too. That means for the next 2 years he will be able to implement his policies, mostly hassle-free. The policies we care about are the ones that help you do one thing: Pay. Less. Tax.
Trump’s Tax Proposals
Making the 2017 Tax Cuts Permanent
Trump wants to make his 2017 tax legislation permanent. The most important parts of that legislation are making the highest tax bracket for individuals 37%. He doubled the standard deduction, and in turn got rid of personal exemptions. Most importantly he added a 20% deduction for entrepreneurs and business owners call the QBI deduction. He would like to make all of these permanent.
Reducing the Corporate Tax Rate
During the 2017 Tax Curst, Trump lowered the Corporate tax rate from 35% down to 21%. He has now vowed to reduce the Corporate Tax Rate from 21% to 20%, and even lower, 15%, for U.S. Corporations that manufactured their products in the U.S.A. He says that in order to qualify for the 15% preferential tax rate, your small business must hire and make the products in the U.S.A. In other words, manufacturing and labor must be U.S. sourced, and not overseas.
Eliminating Taxes on Tips and Overtime
The President-Elect has promised to eliminate income tax on TIPS and overtime. This will help middle class and hospitality workers take home more of their money. However, it’s important to note that it does not eliminate FICA taxes (Social Security & Medicare taxes).
Ending Taxes on Social Security
As it stands now, if your only income is Social Security, you don’t pay taxes on it. However, if you make over $34,000 a year in other sources of income, you may have to pay up income tax on up to 85% of your social security benefits. This tax break will help older business owners and high-income retirees, over 69, that collect social security.
Tax Deduction – Auto Loan Interest
Trump has signaled that he would like to allow a deduction for interest on your car loan. He is hoping that this deduction will make the cost of new auto sales more affordable. If you know anything about what’s been going on in the auto-dealership industry, the last few years has been abysmal. The hope is that this new deduction will stir up more sales in the auto industry and help both consumers and auto-retailers.
Tax Deduction – Restoring S.A.L.T Deduction
Part of Trumps 2017 tax legislation was that he put a cap of $10,000 on the state and local income tax deduction (a.k.a. SALT Deduction). Trump has signaled that he will eliminate the $10,000 cap, which will help high taxes states like New Jersey, New York, and California.
Excise Tax on University Endowments
Part of the 2017 tax legislation had implemented a 1.4% excise tax on private colleges and universities, Trump has signaled that he would like increase this to from 1.4% to 10%. This is one of the few places where Trump has signaled to increase taxes. Probably to make up the tax saving from his other proposals. Also, this will mostly affect private colleges / universities like Harvard and Yale.
Tariffs
Even though Trump has signaled that he would like to replace the income tax with Tariffs. Most economists and the Tax Foundation have all come out that it’s unreasonable to do so. You should keep in mind, when one country imposes tariffs on another, it causes retaliatory tariffs to be imposed by the other country – causing a trade war.
In my opinion, it’s mostly talk & speculation since too many people in his camp are against it. You should also remember, back in 2016 Trump had not gone into tariffs, until after he got his corporate tax cuts passed. I imagine it will be more of the same during his 2nd term.