Some advisors say that in the early hours of November 6, when the US presidential election was decided in favor of Donald Trump, many Americans predicted that “Trump’s victory would mean that tax cuts would continue.”
Last year, many Americans braced for the expiration of the Tax Cuts and Jobs Act of 2017 (TCJA), also known as the Trump tax cuts. The TCJA was the largest overhaul of the tax code in 30 years. This included extensive tax cuts for businesses and individuals. Many of the individual benefits, including lower tax rates for nearly all Americans, expire at the end of 2025.
Now that Trump is back in the White House with majorities in both houses of Congress, advisers say the TCJA’s deadline is likely to be extended.
“There was a bit of a sense of relief for our clients, especially those who didn’t necessarily want him to win or vote for him,” said Daniel Millan, managing partner at Cornerstone Financial Services in Southfield, Michigan. he said. “It’s to make me feel better about the loss of[Vice President Kamala Harris]. It’s a solace to myself in a way.”
What will Americans get if the Trump tax cuts are extended?
Investment portfolios and the economy could become stronger, at least in the short term: Americans are already seeing their 401(k) and other stock market investments soar; is also influenced by expectations that Mr. Trump will keep corporate tax rates low and perhaps even lower them, according to some advisers. Said. The blue-chip Dow index and the broader S&P 500 index soared to record highs the day after the election and remain strong.
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“Companies that delayed investment spending due to election or regulatory uncertainty are now ready to start deploying capital,” James Knightley, chief international economist at Dutch bank ING, said in a report. Maybe,” he said.
Economists say this should bode well for corporate profits and economic growth.
Scott Anderson, chief U.S. economist at BMO Economics, raised his forecast for economic growth in 2025 to about 2.2% from 1.9%. “President Trump’s victory is likely to at least temporarily boost consumer and business confidence, as well as stock market performance,” he said.
Lower tax rates. One of the most important changes for most Americans is the reduction in income tax rates. The top tax rate decreased from 39.6% to 37%, 33% to 32%, 28% to 24%, 25% to 22%, and 15% to 12%. The minimum tax rate remained at 10% and the 35% tax rate remained unchanged. If the income tax cuts are not extended, the affected classes will return to pre-TCJA levels.
Trump’s victory “renewed our confidence that the tax cuts will be extended or made permanent,” Millan said. “This is good news for our finances.”
Jim Cherniak, chief investment officer at Ambassador Wealth Management in Warrenville, Illinois, said Americans don’t need to rush into converting to a Roth IRA because income tax rates are expected to remain low. said.
A Roth conversion moves a traditional pre-tax IRA, SEP IRA, SIMPLE IRA, or 401(k) into a Roth IRA. People pay income tax on the converted amount but can later withdraw it tax-free. Roth IRAs are also not subject to required minimum distributions.
Estate planning: Wealthy people don’t have to rush to liquidate assets to protect them from taxes, advisers say. The TCJA doubled the federal lifetime gift tax exemption and indexed it annually to inflation. In 2024, each individual will receive a combined federal estate and gift tax exemption of $13.61 million. At the end of 2025, this exemption amount will be halved again.
“That was a top priority for our customers, but the election basically made those conversations a hot topic,” Millan said.
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Are there any downsides to the expanded TCJA for consumers?
The biggest downside would be a widening budget deficit, but the pain may not be felt immediately, economists and advisers said.
The nonpartisan nonprofit Committee for a Responsible Federal Budget estimates that a full extension of Trump’s tax cuts could increase the federal deficit by $4 trillion to $5 trillion over 10 years.
Economists said a rapid increase in the budget deficit could lead to higher inflation and long-term interest rates. This could mean the cost of food, rent and services will rise again, making borrowing more expensive for businesses and individuals.
“In theory, the Fed might need to prematurely end the easing cycle or even reverse the easing cycle if inflation gets out of control,” Anderson said. “But again, this is more of a 2026 story than a 2025 story.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
