The election results are in: Donald Trump will return to the White House in January 2025. And for CPAs and tax professionals, this means preparing for the potentially significant changes brought about by Trump’s tax proposals while helping clients navigate immediate planning decisions.
The potential for significant tax changes is pretty high, given that major provisions of the 2017 Tax Cuts and Jobs Act are set to expire in 2025. So, let’s get into it.
Looking Back to Look Forward
To understand what’s coming, we should first examine Trump’s existing tax legacy, the Tax Cuts and Jobs Act (TCJA) of 2017. This sweeping reform—with some of the largest tax cuts since Ronald Reagan—marked the most significant change to the US tax code in over three decades. For individuals, it included:
- Lowering individual tax rates. The TCJA reshaped individual income tax brackets, reducing the top rate from 39.6% to 37% and adjusting rates across other brackets.
- Doubling standard deductions. The standard deduction was doubled from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for joint filers.
- Expanding child tax credits. To support middle-class families, the child tax credit was increased from $1,000 to $2,000 per qualifying child, and the income threshold for eligibility was raised.
- Capping SALT deductions. The state and local tax (SALT) deductions were capped at $10,000.
For businesses, it included:
- Corporate tax rate reduction. The corporate tax rate was permanently slashed from 35% to 21%.
- Pass-through income. Owners of pass-through businesses gained a 20% deduction for pass-through income.
While these changes led to tax reductions for many Americans and businesses, the benefits were not evenly distributed across income levels. Not to mention, many TCJA provisions, except for the corporate tax, were designed to sunset at the end of 2025. And if Congress doesn’t extend them, most of these tax cuts will expire.
Trump’s New Tax Agenda
Trump has outlined several ambitious tax proposals for his return to office, building on the TCJA and promising to provide relief to specific groups, such as hourly workers, retirees, and business owners. Here are the changes he’s proposing:
- Tip exemption: Trump plans to exempt tip income from federal taxation for workers in service industries (e.g., hospitality, restaurants), which could reshape compensation structures.
- Overtime exemption: The second Trump administration reportedly wants to eliminate federal taxes on extra hours worked, a move that some economists say could impact Social Security contributions and future retirement benefits.
- Social Security exemption: Eliminating federal taxes on Social Security benefits is another reported proposal. It would provide the most relief to beneficiaries earning between $63,000 and $200,000.
- Ending SALT cap: Trump also plans on removing the $10,000 limit on state and local tax (SALT) deductions, which would predominantly benefit wealthy homeowners in high-tax states. The estimated cost would be $1.2 trillion over a decade, with 92% of benefits flowing to households in the top 10% of earners.
- Corporate tax rate reduction: The next Trump White House wants to lower the corporate tax rate from 21% to 20%, and, in some cases, slash it to 15% for companies manufacturing in the United States in an effort to encourage domestic production. But it could potentially reduce tax revenue by $361 billion through 2034.
- Tariffs: The proposed 10 to 20% universal tariff on imported goods—with higher rates (60%) for China—would likely raise costs throughout the supply chain, resulting in higher consumer prices.
- Locking in 2017 Trump tax cuts: Trump wants to make the individual TCJA provisions permanent, which would extend the reduced individual tax rates, doubled standard deduction, and expanded child tax credit beyond their planned 2025 expiration. It would also add at least $3.9 trillion to the country’s debt through 2035.
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What The Experts Are Saying
While Republicans have secured control of the Senate, the House remains undecided as of this writing. But even with potential Republican majorities in both chambers, Trump’s tax proposals aren’t automatic. Fiscal conservatives are expected to scrutinize the projected costs of Trump’s proposals. Here’s what experts are saying about Trump’s tax agenda:
Tariffs
“We can attest to the fact that if you charge us more to bring a product in, it’s going to cost more for the consumer to buy that product. It’s kind of Econ 101.”
– Matt Priest, head of the Footwear Distributors and Retailers of America
Making 2017 Trump Tax Cuts Permanent
“Most of them are related to individuals. If they are allowed to expire, that would raise the tax for many individuals, which is an unattractive proposition for any president or for Congress.”
– Kasey Pittman, director of tax policy at Baker Tilly
Making Social Security Income Tax-Exempt
“It’s hard for me to imagine that Democrats would be willing to provide votes to get over that 60-vote threshold and weaken Social Security solvency.”
– Charles Blahous, senior research strategist at the Mercatus Center at George Mason University
The Likelihood of Each Trump Tax Proposal Being Enacted
| Proposal | Likelihood | Reasoning |
| Exempting tip | Unlikely |
|
| Exempting overtime | Moderate |
|
| Exempting Social Security | Unlikely |
|
| Removing SALT cap | Moderate |
|
| Corporate tax rate reduction | Likely |
|
| Universal tariffs | Unlikely |
|
| Making 2017 Trump Tax cuts permanent | Very Likely |
|
Be Prepared to Answer These Questions from Clients
As news of Trump’s tax proposals spreads, CPAs should prepare for an influx of client questions about tax planning under a second Trump administration. Given that major tax changes could be on the horizon—especially with TCJA provisions set to expire in 2025 and new exemptions proposed for varying income levels for both individuals and businesses—clients will be looking for immediate guidance and long-term strategy. Here’s what you can expect to hear.
1. “How would eliminating federal taxes on tips and overtime affect my business?”
Answer: This could significantly impact payroll processes and compensation structures, especially in service industries. While it may be beneficial to take-home pay, you should do your homework on the ramifications of potential compensation restructuring and how it might impact your business.
2. “If the 2017 tax cuts are made permanent, what does that mean for my long-term financial planning?”
Answer: Extending the TCJA would provide more certainty for long-term planning. It would maintain lower tax rates and a higher standard deduction, which could potentially allow for more aggressive saving and investment strategies.
3. “What happens to my Social Security planning?”
Answer: The elimination of federal taxation of Social Security income would mainly benefit those earning between $63,000 and $200,000. You’ll want to consider that this change could accelerate trust fund depletion, so continue current planning strategies until or unless this exemption becomes law.
4. “With Trump’s tariffs potentially on the horizon, should I start sourcing from domestic suppliers?”
Answer: The proposed 10-20% universal tariff could greatly impact supply chain costs. While you can start identifying domestic alternatives now, keep in mind that sudden shifts in the market can also raise prices as other businesses make similar moves.
5. “Should I accelerate income into 2024 or defer until 2025?”
Answer: This depends on individual circumstances, but with potential tax cuts ahead, deferring income into 2025 where possible could make sense for some clients. Remember, though, that tax cuts are not guaranteed.
What’s Next
While campaign promises don’t necessarily translate into policy, and Trump’s victory has set the stage for potentially sweeping tax changes, the reality is that tax policy shifts rarely happen quickly or even as proposed. That’s why it’s important to be proactive and remain current on tax policy news.
Remember that tax planning is about understanding the range of possibilities and helping your clients make informed decisions with the information you have on hand. The firms that thrive in 2025 and beyond will be the ones having proactive conversations with clients today, not those waiting for perfect clarity tomorrow.