The White House's 2025 Tax Plans

With the conclusion of the 2024 presidential election and the Republican party controlling both the executive and legislative branches of government, some implications about our tax future are starting to take shape.

Tax policy emerged as a focal point during the campaign, with proposals ranging from new tax credits for caregivers to making the Tax Cuts and Jobs Act of 2017, or TCJA, provisions permanent.

Now that the election is over, it's important to revisit some of the most prominent proposals and consider the likelihood that each one will be enacted. Here are seven notable proposals outlining the White House's 2025 tax plans—and what they mean in terms of impact moving forward.

1Make TCJA permanent

One key proposal of the incoming administration is the extension of the TCJA. Set to expire at the end of 2025, it includes significant changes to individual income provisions, including:

• Changes to income tax rates and brackets
• Increased standard deduction
• Repeal of the personal exemption
• Lowering of the top income tax rate to 37%
• Repeal of the Pease limitation on charitable contributions
• Changes to Alternative Minimum Tax, or AMT, thresholds
• A 20% deduction for pass-through entities and self-employed individuals

These provisions were designed to simplify the income tax reporting process, encourage tax filers to utilize the standard deduction rather than the more complex itemized deduction and lower the overall tax liabilities for most taxpayers.

Changes we anticipate

Given the popularity of most of these provisions and the makeup of Congress, it's highly likely that the majority of them will remain.

2Restore SALT deduction

Another top-line proposal for 2025 is the restoration of the full deduction for state and local taxes, or SALT. The TCJA capped this deduction at $10,000, and the SALT cap, as it came to be known, hit homeowners hard—particularly in states with high property or state income taxes.

On the table for next year is whether the cap on the deduction will be raised or eliminated. The SALT cap could prove to be quite expensive over time and would likely result in debate among legislators. While some members of Congress have proposed raising the cap to $80,000, many oppose such changes due to potential revenue losses.

Changes we anticipate

There's a high probability the SALT deduction will change, but in which direction it will go is harder to predict.

3Maintain higher estate tax exemption

While TCJA didn't get rid of the estate tax, it raised the exemption to $13.99 million per person, so fewer than 1% of estates face a tax liability. The proposal to make the TCJA permanent suggests the administration aims to maintain this high exemption, a move welcomed by many higher-income families. However, the exception is set to revert to $5 million—adjusted for inflation, around $7 million—at the end of 2025. This has prompted many families to rush into wealth transfers and gifting before the deadline.

Whether the estate tax exemption will be made permanent as is remains unclear. The proposed immigration deportation plan could impose significant costs, requiring funding sources that may include revisiting the estate tax. Balancing tax breaks with fiscal demands could lead legislatures to use the estate tax as a revenue-generating option.

Changes we anticipate

Overall, the estate tax exemption increase is likely to be made permanent, but there's a possibility it could be used as a revenue option to pay for an expensive immigration deportation plan.

4Eliminate taxes on tips

Another item appealing to many tipped workers is the proposal to eliminate taxes on tips—a populist proposal aimed at appealing to the working class. While the idea has potential benefits for professions more reliant on tips, such as waitstaff, it raises significant implementation and legal challenges.

Making tips tax-free could encourage tipping in some cases, but it might also backfire. Since the pandemic, tip requests have increased exponentially. Exempting tips from taxes could make these requests even more widespread and cause customer pushback. Employers may also reduce base wages, assuming workers are earning more due to untaxed tips.

The proposal could face legal hurdles. Workers in similar circumstances may be subject to disparate tax outcomes. For instance, a worker in a state with a higher minimum wage would pay more income tax because they get less tips than a worker in a state with a lower minimum wage who earns more of their compensation from tips. This may also lead nontipped workers to attempt to reclassify earnings as tips to benefit from the exemption.

Changes we anticipate

Without more details or a clear implementation strategy, it's unlikely the proposal to eliminate taxes on tips will move forward.

5Eliminate taxes on Social Security

Another proposal that's been set forth is the elimination of taxes on Social Security benefits—another populist proposal that resonates with retirees. While the idea could provide some welcome relief to Social Security recipients, it raises significant funding concerns. Taxes on benefits currently contribute to the program's funding. Removing them is estimated to cost up to $1.5 trillion over the next 10 years. This comes at a time when the Social Security trust fund is projected to run out in the early 2030s, further straining the system.

Changes we anticipate

This proposal will result in a lot of debate and negotiation. For instance, the tax threshold on Social Security benefits could be up to 50% of benefits rather than 85%. It could be a challenging policy to implement without addressing broader Social Security funding issues.

6End taxes on overtime pay

The theme of eliminating taxes continues with the proposal to get rid of taxes on overtime. While this proposal aims to incentivize workers, its impact and feasibility may be limited.

Overtime has already been a focus of recent changes. The US Department of Labor recently increased the number of workers eligible for overtime from those earning $35,568 to $43,888—then to $58,656 by January 1, 2025. However, a federal judge blocked the increase.

Approximately 7 million people worked overtime last year according to the Budget Lab at Yale University, but the scope of the tax cut would be narrow given the blocked overtime eligibility expansion. Also, the Tax Foundation estimates that it could cost the federal government anywhere between $225 billion and $3 trillion or more over the next 10 years.

Changes we anticipate

Given the high fiscal cost and limited number of beneficiaries, this proposal is unlikely to gain sufficient support for passage.

7Introduce caregiver tax credit

Also under consideration for 2025 is a tax credit for caregivers. However, there haven't been many details released on how the credit would work. For instance, would it be a flat amount like the child tax credit? Would it depend on the number of hours worked as a caregiver? Or would it act like some benefits did during the pandemic—as a reimbursement for certain costs? Without specifics, it's difficult to estimate the potential cost or how many people would qualify.

The proposal could offer significant relief to caregivers, a majority of whom tend to be women. Of the 53 million Americans acting as caregivers, 60% are female and many spend over $7,200 annually from their own pockets to provide care. Some states, such as Arizona, already offer caregiver benefits, suggesting a potential model for implementation.

Changes we anticipate

It's difficult to gauge the appetite for passing this legislation. It's viable, but more details must come to fruition to make a more educated guess.

Tax proposals at a glance

The following table summarizes the tax proposals up for discussion in 2025, as well as their likelihood given the economic and political climate.

The bottom line

The proposed tax changes for 2025 reflect a mix of populist policies aimed at reducing tax burdens on individuals—although feasibility varies significantly. From extending the TCJA to eliminating taxes on tips and Social Security benefits, the proposals offer potential relief but face fiscal and implementation challenges.

Deciding which changes could benefit you depends on your financial situation and the outcome of Congressional debates. Connect with your tax advisor to weigh the appropriate tax strategies, and talk to your wealth consultant to build a plan around the potential impacts of these proposals.