When former President Donald Trump was in office, he signed the Tax Cuts and Jobs Act (TCJA) into law in 2018. This law changed the tax code to cut taxes for shareholders and individual taxpayers – and it made history since the last major tax code change was in 1986.
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The TCJA nearly doubled the standard deduction, increasing it from $6,500 to $12,000 for individual filers and $13,000 to $24,000 for joint returns. It also eliminated or restricted many itemized deductions, reducing the number of taxpayers with itemized deductions from 31% to 9% from 2017 to 2020.
These are just some of the many changes the TCJA brought about in the tax code. But now, those changes are set to expire in 2025. The upcoming election is a critical moment for tax policy, and the results will impact individuals at all income levels.
So, what are the major party candidates' tax plans should they win the election?
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Kamala Harris's Tax Plan
Kamala Harris is committing to President Biden's tax plan and says she won't raise taxes on those earning less than $400,000 annually. The TCJA also lowered the marginal income tax rate for the top 1% of earners from 39.6% to 37% – Harris will likely let this revert with the TCJA expiration.
Another component of Biden's 2025 budget proposal, even though not directly affected by the TCJA, calls for increasing the Medicare tax rate from 3.8% to 5% for those earning more than $400,000 per year.
The TCJA doubled the child tax credit from $1,000 to $2,000. While this is set to expire, Harris is proposing a permanent increase of up to $3,600 per child (depending on age) and a newborn tax credit of $6,000 for the first year of a child's life.
Overall, Harris's tax plan focuses on keeping taxes steady for the middle class while ensuring that the wealthiest Americans pay more.
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Donald Trump's Tax Plan
Trump has stated that he plans to extend all tax cuts from the TCJA. He has also been a proponent of exempting Social Security and tip income from taxes.
Additionally, Trump has been a vocal proponent of further lowering the corporate tax rate. The TCJA reduced this from 35% to 21%, and Trump recently pledged to lower it to 15%. He argues that additional tax cuts for businesses will spur job creation and boost the economy.
Regarding child tax credits, Trump's running mate, JD Vance, has proposed a $5,000 tax credit per child.
Trump's tax plan may continue to prioritize lower taxes for individuals and businesses alike, but it will particularly benefit high-income earners and corporations.
The Impact of the TCJA Expirations
Understanding how the TCJA tax code changes impacted you and what the implications will be when they expire – or get extended under a Trump administration – will help keep you informed about tax policy as the election draws closer.
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The biggest tax policies impacted by this law that are set to expire include:
Doubled child tax credit
Double federal estate and gift tax exemptions
Doubled standard deduction
Reduced top federal income tax rates
Voters are faced with two very different approaches to tax policy and should take the time to understand the implications of both plans. The outcome of this election will play a pivotal role in shaping the future of the U.S. tax system, impacting individuals, families, and businesses for years to come.
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This article What's At Stake With The TCJA Expirations? Trump And Harris Outline Their Tax Plans For 2025 originally appeared on Benzinga.com
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