How tax cuts and jobs act renewal would affect your wallet

The Tax Cuts and Jobs Act (TCJA) of 2017, which was signed into law during President Donald Trump’s first term, lowered tax rates overall. While the current legislation is slated to expire at the end of 2025 if Congress doesn’t act to extend the bill, the bill’s renewal is likely given that President Trump has taken office again and there’s a new Republican majority in Congress.

The Wealthy Will Benefit From Unchanged or Lower Tax Rates

Kaufman Rossin explained that there will likely be a tax break for “just about everyone” on the list of cuts that Trump promised during his latest campaign. These range from putting a stop to income-tax rate increases scheduled for 2026 as well as eliminating taxes on tips and Social Security income.

However, the wealthier you are, the more tax benefits you will probably enjoy under Trump’s second term. Vice President Kamala Harris’s defeat ultimately eliminates the chance for a wealth tax to be signed into law.

Overall, the outlook for middle- and lower-income taxpayers is less optimistic with Trump’s win. He has floated the idea of more narrow tax breaks for targeted groups of lower-income Americans. In short, the renewal of the TCJA would likely pave the way for tax-friendly policies that may disproportionately benefit top earners at the expense of middle- and lower-income Americans.

New Tariffs Could Drive Up the Cost of Consumer Goods

One of Trump’s biggest campaign trail promises was to implement sweeping tariffs, specifically on consumer goods imports from China. He’s spoken about issuing a tariff as high as 60% on imported Chinese goods as well as a 10% or 20% tariff on imports from anywhere else in the world.

Experts estimate that this type of policy would raise a net $2.8 trillion or $4.5 trillion in federal funds over 10 years and would be the biggest offset to Trump’s proposed tax cuts. At the same time, the direct effect of tariffs would likely mean that companies would pass on their higher cost and raise prices on imported consumer goods.

Howard Gleckman, a tax policy center senior fellow, explained to Barron’s that tariffs ” … would effectively be a significant tax increase,” averaging about $1,800 annually per household with a 10% tariff or $3,000 with a 20% tariff.

The impacts of upcoming tax policy changes remain to be seen, but we can certainly expect them to affect all Americans.

Read the full article at GoBanking Rates.