Trump’s tax plan: The latest on the ‘big, beautiful’ tax bill, and what to expect for your taxes in 2025 and beyond

From extending the tax cuts he signed into law in 2017 to ending taxes on tips, overtime pay, Social Security benefits and more, President Donald Trump has never made a secret of his goal to make sweeping changes to the U.S. tax code. And now, Republicans in Congress are doing all they can to turn Trump’s agenda into reality.

Current status of the tax bill

House Republicans on Monday published the text of a 389-page bill that, in addition to extending existing income tax rates and other provisions of the Tax Cuts and Jobs Act that would otherwise expire at the end of this year, includes the following provisions:

• Increase the standard deduction for 65-and-older Americans by $4,000, in addition to the current standard deduction and on top of the current extra standard deduction for older Americans, for tax years 2025 through 2028. The amount would phase out for single filers with income of $75,000 or more, and for married couples with income of $150,000 or more.
• Eliminate taxes on tips and overtime pay, starting in 2025 and going through 2028. While a separate idea to eliminate taxes on Social Security benefits — something oft-cited by President Donald Trump as a goal — is not included in this proposal, the higher standard deduction for 65+ taxpayers is seen as an alternate way to ease older Americans’ tax burden, and hiking the standard deduction is a much easier legislative path forward than changing how Social Security benefits are taxed.
• Raise the child tax credit to $2,500, from its current $2,000, effective from 2025 through 2008. After 2028, the child tax credit would drop back to $2,000.   
• Permanently extend the popular 20 percent qualified business income deduction for pass-through entities, such as S corporations, partnerships, and sole proprietorships.
• Raise to $30,000 the current $10,000 cap on the state and local tax deduction. A $30,000 cap is much lower than some moderate Republicans would like, so this could prove to be a sticking point as this bill moves forward.
• Eliminate the electric vehicle tax credit as of the end of 2025. However, the bill would allow an exception for manufacturers who have yet to sell 200,000 vehicles.
• Create a tax deduction for car loan interest, available even to taxpayers who don’t itemize their deductions, from 2025 through 2028. However, the deduction would phase out for single filers with income of $100,000 or more, and for couples with income of $200,000 or more. 
• Create a deduction that would allow non-itemizers to claim charitable contributions up to $150 per single filer and $300 per married couple, effective from 2025 through 2028.

The proposed bill doesn’t include a tax hike on the wealthiest Americans, and maintains 37 percent as the highest rate, despite reports that Trump had asked House Speaker Mike Johnson to include in the bill a new tax rate of 39.6 percent for high-income taxpayers. For context, here are the figures for the highest U.S. tax rate, and who it has applied to, in recent years:

House Speaker Mike Johnson has said he wants a vote on a tax bill by Memorial Day, but it’s uncertain if lawmakers will come to an agreement by that date. After the House passes its version of the bill, it’ll go to the Senate. Trump has said he wants a final bill to pass by July 4.  

There’s a good chance that many, if not all, of the TCJA’s expiring provisions will be extended under a Republican-controlled Congress. But Republicans aren’t completely aligned on how to pay for these tax cuts, so passing the House bill and then reconciling it with the Senate’s version won’t be easy.

Many experts warn that the final bill’s cost could have a significant impact on the national debt and federal deficit. Extending the TCJA alone will add $4.5 trillion to the national debt over the next 10 years, according to a report by the Committee for a Responsible Federal Budget, a nonprofit, nonpartisan research organization.

How tax laws may change

While it’s unclear what the final law will look like, it seems likely that some type of tax-law overhaul will happen this year.

Under the TCJA, key changes were made to individual tax laws, including the near-doubling of the standard deduction and increasing the child tax credit to $2,000, from $1,000. Plus, the top tax rate for high-income earners was reduced to 37 percent, from 39.6 percent, and a new 20 percent deduction was created for certain types of business income.

While some of the TCJA’s provisions were permanent and others are set to expire at the end of 2025, U.S. lawmakers can include just about any tax provision they want in a new comprehensive tax bill — assuming they can get it passed.

As a result, along with the possibility of extending the TCJA’s expiring provisions — which would effectively maintain the status quo for U.S. taxpayers — there’s a decent chance lawmakers will change other tax laws as well.

Trump has promised a variety of tax breaks, both during his campaign and now as president, including:

• Eliminating taxes for people who earn less than $150,000
• Removing the current $10,000 cap on the deduction for state and local taxes
• Eliminating taxes on tip income, overtime pay and retirees’ Social Security benefits
• Creating a tax deduction for car loan interest payments for American-made cars

Below are some ways experts have said taxes may change in 2025 and beyond:

1. Tax benefits for small businesses

The TCJA lowered the corporate tax rate for businesses to a flat 21 percent, from a graduated system that had a top rate of 35 percent. That change was made permanent and isn’t part of the TCJA’s expiring provisions (though just about any tax law is potentially subject to lawmakers’ modifications).

But the TCJA also offered a major tax break to pass-through businesses, such as partnerships, S-corporations and sole proprietors: If those businesses meet income limits and eligibility requirements, they can deduct 20 percent of their qualified business income, or QBI — a major tax benefit for businesses that qualify.

That provision is slated to expire at the end of 2025, but the current version of the Republican bill extends this tax benefit.

While there is bipartisan support to extend the QBI deduction, also known as the Section 199A deduction, it’s unclear at this point what will happen.

Plus, pass-through businesses — where business owners report income on their personal tax return and pay individual income tax rates on that income — also benefit from the TCJA’s lower marginal tax rates.

2. State and local taxes (SALT) cap

To pay for the cost of TCJA, lawmakers eliminated personal exemptions, which were a way for taxpayers to reduce their taxable income, and capped the amount taxpayers could claim for the state and local tax (SALT) deduction at $10,000. The SALT deduction lets taxpayers write off their property taxes, plus their state and local income or sales taxes.

On the campaign trail, Trump suggested he wanted to remove the SALT limit. Meanwhile, other ideas that had been floated by lawmakers included raising the cap to $20,000, from $10,000, or doubling the amount for couples who are married filing jointly. The current $10,000 cap applies to all filing statuses, including single filers and those married filing jointly (the exception is those who are married but file separately, for whom the cap is $5,000).

The Republican proposal currently raises the cap to $30,000.

Of course, removing the cap, or even increasing it, would raise thorny questions about how to fund the extension of other elements of the TCJA.

“Repealing the SALT limit would be taking away some of the revenue to pay for other TCJA reforms,” says Jan Lewis, a certified public accountant and partner with BMSS Advisors and CPAs in Ridgeland, Miss.

3. Other proposed tax breaks

Trump also said on the campaign trail that he wants to eliminate taxes on certain types of income.

• No tax on Social Security benefits: “Seniors should not pay tax on Social Security,” Trump said on his social media site Truth Social in 2024. Some retirees owe income tax on Social Security benefits if they receive income from other sources that pushes them over the Social Security administration’s income thresholds. Those with low to modest income typically don’t pay taxes on Social Security benefits. The current Republican proposal doesn’t eliminate taxes on Social Security, but it does raise the extra standard deduction for taxpayers aged 65 or older.
• No tax on overtime pay and tip income, plus a tax deduction for interest paid on car loans: All of these provisions are included in the proposed Republican law.

4. Tariffs and the External Revenue Service

Since taking office in January, Trump has embraced tariffs, including slapping a 145 percent tariff on goods from China (now temporarily reduced to 30 percent), a minimum 10 percent tariff on all goods imported into the U.S., 25 percent tariffs on all products from any country that imports Venezuelan oil, 25 percent tariffs on certain products from Canada and Mexico, and more.

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Relatedly, in January, Trump announced on Truth Social that he would create an External Revenue Service to collect tariffs, duties and revenues from foreign sources. Generally, U.S. companies that buy foreign goods pay import tariffs to the U.S. government.

Research has shown that consumers often end up footing the bill for higher tariffs.

“The implementation of tariffs had an impact on small businesses over the years, as many U.S. businesses rely on goods imported from other countries,” says Brandi M. Samuel, a certified public accountant and international tax principal at Windham Brannon LLC, in Atlanta.

“In addition to the impact on small businesses, customers who purchase these goods are likely to also experience financial strain” under tariffs, Samuel says.