How Trump’s Election Win Could Affect Your Taxes

Discover how Donald Trump’s potential win could impact your taxes! In this video, we break down key tax policies, changes to the tax code, and what they might mean for you, your family, and your business. Whether you’re a small business owner, investor, or an individual filer, stay informed about the possible implications on income tax, deductions, credits, and more.

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Key Takeaways:

• Potential tax changes under a Trump administration.
• Insights into corporate taxes, estate taxes, and individual income brackets.
• How these changes could affect your financial planning.

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DISCLAIMER:

This video is intended for education purposes and should not be taken as legal, financial or tax advice.  You should consult with a professional about your unique situation before acting on anything discussed in these videos.  Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. are providing educational content to help small business owners and individuals become more aware of certain issues and topics, but it cannot give blanket advice to a broad audience.  Things are always changing, therefore, this channel may not contain the most up-to-date information.  Neither Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. nor its members can be held liable for any use or misuse of this content.

TRANSCRIPTION:

How will taxes be implicated now that former President Trump is President-elect Trump and will indeed be returning to the White House? Stay where you are to find out. So after much anticipation and speculation and predictions, the United States elections have come and gone, and former President Trump will be returning to the Oval Office. He has been president before, so we’re more familiar with his policies than we would have been with somebody new.

However, today we’re going to touch base on what is on the horizon regarding the tax world. In his first term, the Tax Cuts and Jobs Act was passed in 2017 and they went into effect in 2018 tax year. The changes brought forth in that act were due to expire in 25 and 26 had Kamala Harris won the election.

Now we know that with President-elect Trump coming back, he is proposing extending the Tax Cuts and Jobs Act as well as adding a few more new things. The rumor is that his proposals only benefit the uber rich, but the changes that he’s proposing affect almost everybody in all income ranges. Let’s start with the tax rates.

The United States tax system we all know is based on a graduated tax rate scale. This means that there is a tax rate assigned to a window or a range of income. So for example, if in 2025 you are in the 22% tax bracket, you’re not going to pay 22% taxes on all of your taxable income, but rather if you’re single, for example, on income up to $11,925, you pay 10%.

From $11,926 to $48,475, you pay 12%. From $48,476 to $103,350, you’d pay 22%. These ranges change if you’re married filing joint or have household or married filing separate.

The Tax Cuts and Jobs Act reduced the tax rates from 2018 through now. You were subject to 10%, 12%, 22%, 24%, 32%, 35%, with 37% being the top rate. Had this expired, we would go back to 10%, skip 12% and go to 15%, skip 22% and go to 25%, 28%, 33%, 35% and the top would be 39.6%. This alone makes a difference even if your income is under $50,000 a year.

Another big change was the amount of the standard deduction. The Tax Cuts and Jobs Act increased the standard deduction from $6,500 to $12,000 for individual filers or single filers, from $13,000 to $24,000 for married filing joint returns and from $9,550 to $18,000 for head of households between 2017 and 18. These amounts are indexed annually for inflation and on October 22, 2024, the IRS announced the standard deduction rates for 2025 tax year.

This is for the tax returns due in 26. The deduction will rise to $15,000 for single filers and those that are married filing separately and $30,000 for those who are married filing joint and $22,500 for heads of households. This helped many people because before the Tax Cuts and Jobs Act, your standard deduction was subtracted from your total income to help reduce the amount of taxable income, which is what you pay taxes on.

The bigger the discount, the less, of course, you pay. Well, taxpayers that were able to itemize their deductions could potentially use a portion of their medical expenses, their mortgage interest, their property taxes, charitable donations. If the sum of all of these categories were higher than the standard deduction, then they were allowed to use their itemized total.

So, for example, if your total came out to $20,000 instead of $13,000, which is the standard deduction, you’d get to write off the additional $7,000. The problem is typically really hard to pass a standard deduction amount if you don’t have a home, right? So, mortgage interest, property taxes are the two expenses that can really help you meet or surpass the standard deduction. So, if you didn’t own a home, you oftentimes were stuck with the standard deduction.

So, the renters felt a little bit gypped, but with the standard deduction doubling, it evened out the playing field in a sense for everybody. However, there was one aspect of this modification that a lot of people didn’t appreciate, and that was the limit on the SALT deductions or the State and Local Tax Limitation. This means that if you had property taxes and you lived in a state where property values are high, your property tax limit was $10,000.

So, even if you ended up paying $18,000 in property taxes, it would limit the amount that you can deduct to $10,000. So, one of the new proposals is removing that SALT limitation. Now, here’s another big one.

QBI was set to expire. This is Qualified Business Income Deduction. This is big.

QBI is a 20% deduction on Qualified Business Income. So, if you have a flow-through business like an S-Corp or a partnership, or even if you’re a sole proprietor working as yourself, as an individual, you get a 20% deduction automatically. So, say you earned $100,000 net.

This deduction will reduce what you pay taxes on to $80,000 automatically. Remember, this gets reduced again by your standard deduction. So, if you’re married, it’ll get reduced with the new rates, right, by $30,000.

And now, your taxable income is $50,000, which puts you in a 12% tax bracket. I think that’s pretty good. Well, that would have come to an end and will most likely not come to an end because it will be extended.

I’m pretty sure. The next big topic is bonus depreciation. Normally, the cost assets that a company acquires can be depreciated, but over its useful life, which is determined by the IRS.

That can be over a three-year period, five years, seven years, 15 years. But with bonus depreciation, it would allow a business owner that has to buy expensive equipment, like maybe a if you’re in a restaurant business or a truck, if you’re a trucker, medical equipment, etc. Even property rental real estate investors, right, to furnish the properties.

You could depreciate 100% of the cost of that asset the year you buy it, even if you financed it or bought it with credit. This has been slowly phasing out since 2022, reduced by 20% each year. So, in 2023, you were able to take 80% bonus depreciation.

In 24, you could take 60, so on and so forth, until it gets to zero in 2027. But this is also most likely going to remain in place. If you are a C-corp filer on Form 1120, the tax rates were reduced initially before the Tax Cuts and Jobs Act from 28% to 21%.

Now, the proposal is to reduce it to 20% and potentially down to 15% for businesses that manufacture products in the US. This is a 6% tax cut that would be certainly very helpful. Another is no tax on Social Security income.

This is great as well, because although Social Security income is generally not taxable, if you do earn money in your retirement, 50% of it becomes taxable if you’re single and you make $25,000 that year. And 85% of it is taxable if you’re single and make more than $35,000 that year. In my opinion, that’s not fair.

Many people want to continue working or have to continue working in their retirement. You already paid taxes on Social Security on your income when you earned it, and now you have to pay it again upon receiving it. I’m sure you would agree with me that that doesn’t make much sense.

And I would love to see this pass. So when does all this take effect? Well, I’d say most likely in 2028, if we follow the pattern of 2017, when the Tax Cuts and Jobs Act was enacted, it went into effect for the 2018 tax year. But stay tuned to be up to date and be able to maximize your tax benefit.

As usual, thank you for watching until the very end. And if you found this helpful, please give it a like, please share it with as many people as you can so we can continue helping more and more people. Thank you and God bless you.