5 Ways the Second Trump Term Could Affect Your Finances
Income tax cuts are likely to be extended, but electric vehicle tax credits could disappear.
President-elect Donald Trump proposed a number of personal finance initiatives during the presidential campaign, many of which could have a direct effect on your savings and investments. Here’s a look at what you can expect from the new administration.
Trump's effect on income taxes
Trump has pledged to extend the individual income and estate tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA), and with the House of Representatives and Senate in Republican control, that effort is expected to succeed. Those provisions, which are set to expire at the end of 2025, doubled the standard deduction, lowered income tax rates and increased the estate tax exemption to a level that makes federal estate taxes a nonissue for the vast majority of taxpayers. In 2025, estates of up to $13.99 million will be excluded from federal estate taxes, or up to $27.98 million for a married couple.
The TCJA also doubled the child tax credit from $1,000 to $2,000 per child, and Trump has said he wants to make the increase permanent. The credit phases out for single parents with $200,000 or more in income and married couples who file jointly and have $400,000 or more in income. Vice President-elect J.D. Vance has said he would like to increase the child tax credit to as much as $5,000 per child and extend it to all families regardless of income. However, such a tax break would be enormously expensive and face opposition from Republican lawmakers.
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During the presidential campaign, Trump said he supported eliminating the $10,000 cap on the deduction for state and local taxes (SALT), a move supported by lawmakers from high-tax states. However, scrapping the SALT cap would increase the cost of extending the TCJA tax cuts, which would already add $3.9 trillion to the federal deficit through 2035, or $4.5 trillion with interest, according to the Committee for a Responsible Federal Budget, a nonpartisan nonprofit organization.
Trump's second term may impact EV tax credits
Under the 2022 Inflation Reduction Act, eligible buyers can claim a tax credit of up to $7,500 for a new electric vehicle, or $4,000 for a used one, at the point of sale, either as a rebate or as a reduction in the cost of the vehicle. Members of Trump’s transition team reportedly want to scrap the EV tax credit as part of broader tax reform legislation. Elon Musk, founder of EV manufacturer Tesla (TSLA) and a close adviser to Trump, opposes the tax credit, which he says primarily benefits Tesla competitors.
The EV tax credit probably won’t disappear overnight. Congress would need to amend the Inflation Reduction Act or enact a new law to eliminate it. And any effort to get rid of the tax credit faces opposition from U.S. automakers. Still, given the uncertainty surrounding the credit, it’s probably wise to buy soon if you’ve had your eye on an eligible EV. You can research makes and models that are eligible for the credit at www.fueleconomy.gov.
Trump's take on health insurance
During his first term, President Trump tried unsuccessfully to torpedo the Affordable Care Act, aka Obamacare. During the 2024 campaign, Trump said he would preserve the ACA but make changes to the law that could affect the cost of ACA insurance.
One of the most likely scenarios doesn’t require any action by the White House or Congress. ACA subsidies enacted in 2021 in response to the COVID pandemic and extended by the Inflation Reduction Act are scheduled to expire at the end of 2025. If Congress doesn’t extend the subsidies, premiums for individuals who currently receive the subsidies will rise significantly, more than doubling in some states, according to an analysis by health policy research organization KFF (formerly the Kaiser Family Foundation). KFF provides a calculator you can use to estimate eligibility for subsidies in 2025.
Trump's effect on student loans
Trump has made no secret of his opposition to student loan forgiveness, and lawsuits filed by Republican governors blocked some of the Biden administration’s debt-relief initiatives.
While the Trump administration’s position raises questions about the future of loan-relief programs, it won’t affect loans that have already been forgiven, says Mark Kantrowitz, a financial aid expert and author of How to Appeal for More College Financial Aid. Once the federal government discharges a borrower’s debt and the borrower has received notification, “the forgiveness is permanent and final,” Kantrowitz said in an analysis on The College Investor, a website that helps families manage college savings and debt.
For updated information on student loan forgiveness and repayment programs, go to the federal student aid website studentaid.gov.
Trump's effect on credit card late fees
The Trump administration is likely to roll back many of the regulations proposed by the Consumer Financial Protection Bureau, including one that would cap credit card late fees at $8. That proposal has been on hold following a court challenge by the banking industry, and the hold will likely become permanent under the new administration.
However, during the presidential campaign, Trump said he supported capping credit card interest rates at 10%. Such a cap would almost certainly be challenged by the banking industry and is unlikely to pass muster in Congress.
Given that major changes to current credit card late fees and interest rates are unlikely, your best bet is to try to pay off your balance every month and make payments on time. Experian provides a calculator you can use to estimate how long it will take to pay off your credit card balance.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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