If you’ve been keeping an eye on the news, you might have heard about President Trump’s latest tax proposals. You may be wondering, “Are tips and overtime now tax free?”, “Are the IRS layoffs impacting tax season?”, “What new tax laws will pass?”, “Will there be a government shutdown?” and “Should I file my taxes now or wait?”
Here’s what you need to know:
- No tax law changes have passed related to the Trump Administration’s proposals, so there is no impact to your 2024 taxes that you file this year.
- IRS layoffs do not impact their ability to process tax returns and deliver refunds on schedule.
- On Friday, March 14, 2025, a government shutdown was averted, following the passage of a six-month funding bill.
- IRS latest filing statistics for week ending March 7, 2025 reports that refunds are up 5.7% over last year with an average refund amount of $3,324.
- You can file your 2024 taxes (the taxes you are filing in 2025) with TurboTax now. TurboTax stays on top of all tax changes and will help you file your taxes with 100% accuracy guaranteed – whether you want to file yourself or have a tax expert prepare and file your taxes for you.
Want more details? Keep reading…
With a new congress convening earlier this year, multiple tax proposals emerged, many of which are related to the expiration of provisions passed by the previous Trump administration under the 2017 Tax Cuts and Jobs Act, which are in effect from 2018 through 2025.
While we don’t yet know if any tax law changes will occur, President Trump has expressed a desire to further extend provisions from the Tax Cuts and Jobs Act, which expire after 2025 and don’t impact your 2024 taxes. There are also some new provisions that President Trump is advocating for as follows:
- Make the individual and estate tax cuts of the TCJA permanent (potentially without reinstating the cap on itemized deductions for state and local taxes)
- Exempt tip income from taxation
- Exempt Social Security benefits from taxation
- Exempt overtime pay from taxation for certain workers
- Create a deduction for auto loan interest for certain vehicles
- Create a tax credit for family caregivers
- Child Tax Credit expansion
- Lower individual tax rates
- Lower the corporate income tax rate
- Elimination of estate tax
Here’s a breakdown of some of the key Trump tax proposals and what they would mean for you and your taxes:
Permanent Extension of the 2017 Tax Cuts and Jobs Act (TCJA) (without reinstating the cap state and local taxes): This would permanently extend the tax benefits from the 2017 act. The TCJA lowered individual tax rates, nearly doubled the standard deduction, and expanded the Child Tax Credit. However, it also capped the total state and local property, income, and sales tax (SALT) that can be deducted at $10,000. It also capped the amount of mortgage indebtedness on new home purchases on which mortgage interest can be based at $750,000 (down from the previous $1,000,000), eliminated personal exemptions, and certain itemized deductions. There is talk of a permanent extension, but potentially without the cap on state and local property, income, and sales tax. Filers living in states with high state and property taxes are capped at a $10,000 deduction for total state and local property, income and sales tax – even when many of them may pay way beyond that amount. If this part of the provision went back to the way it was prior to the Tax Cuts and Jobs Act (TCJA) without caps, filers in states with high state and property taxes would be able to deduct the full amounts paid.
Exempt tip income from taxation: For tax year 2024 (the taxes you’re filing in 2025) all cash and non-cash tips are income subject to federal taxes, social security, and Medicare taxes and must be reported to the employer. Tips less than $20 in a month are not required to be reported. Employees who receive tips have the responsibility to keep daily records, report their tips to their employer, and report tips on their taxes. Employers also have some responsibilities like collecting taxes on tips, filing forms, paying and depositing taxes, maintaining tip reports, withholding Social Security and Medicare taxes, and paying the employer share of Social Security and Medicare Tax. “No tax on tips” is a proposal right now, and not the law; but, a “no tax on tips” policy would mean service and hospitality workers’ tip income would not be taxed, and employers would not be required to pay an employer portion of social security and Medicare tax on tip income.
Exempt Social Security benefits from taxation: In tax year 2024 (the taxes you’re filing in 2025) not everyone is required to pay taxes on social security income. In general, social security income is not taxed, however other streams of income like retirement income can make a portion of social security income taxable. If your adjusted gross income plus nontaxable interest plus 1/2 of social security benefits – known as combined income – is a certain income threshold then, 50% – 85% of your social security benefits may be taxable. A no tax on social security provision is not a tax law for 2024 taxes (the ones you file in 2025), but if social security was not taxed, then it would not need to be included in a retirees’ additional streams of income like retirement or side gig income to figure out their taxes.
Exempt overtime pay from taxation for certain workers: Firefighters, police officers, and military personnel often make a substantial amount of additional income working overtime. There is talk of a proposal to exempt taxes on overtime pay for certain workers. No taxes on overtime could lower taxable income and taxes since the overtime income would not be included as taxable income.
Deduction for auto loan interest for certain vehicles: The auto loan interest deduction and other personal loan interest deductions were once available in the ‘80s. While we don’t know the specifics of how the auto loan interest deduction would work, in the past, taxpayers needed to be able to claim itemized deductions in order to deduct auto loan interest. Since 90% of tax filers now claim the standard deduction, about 10% of filers would be able to claim it, unless there is a special deduction put into place that allows you to deduct auto loan interest without itemizing or unless you are a business owner who can deduct your car expenses as a business expense.
Tax credit for family caregivers: If you were taking care of a family member like an elderly parent, this proposed credit, if passed, would provide up to a $5,000 nonrefundable federal tax credit for eligible working family caregivers, that would cover some of their qualified expenses.
Expansion of the Child Tax Credit: For tax year 2024 (the taxes you file in 2025), the Child Tax Credit is up to $2,000 per dependent child under the age of 17. The expanded Child Tax Credit proposal is for a credit up to $5,000 per eligible dependent.
Lower Individual Income Tax Rate: Trump is proposing to lower the top individual income tax rate from 37% to 33%. This could mean people could make more money in the highest income tax bracket and be taxed less. For tax year 2024, the tax rate of 37% still applies for the top income bracket.
Lower the corporate income tax rate: Lower corporate income tax rates could mean corporations have more money to reinvest and expand their businesses.
Elimination of the Estate Tax: Also known as the “death tax”, would be eliminated, which could have significant implications for large estates.
When Will These Changes Take Effect?
The Trump Administration’s tax proposals have not passed and do not impact your 2024 taxes that you file this year. If and when tax laws change, TurboTax will be up to date with the latest tax laws when the IRS issues guidance. TurboTax has you covered and has the tools, products, and expertise to help you easily and accurately file your taxes and save money, whether you want to do your taxes yourself, get help along the way, or fully hand your taxes over. You can hand your taxes off to a TurboTax Live Full Service tax expert who can do your taxes from start to finish virtually or in person.
You may be holding off on filing your 2024 taxes after hearing about all of the various tax proposals and uncertainty around if and when they will pass. There is no reason to delay filing since these are only tax proposals and do not impact your 2024 taxes. With the average refund being over $3,000 don’t delay. TurboTax can help you easily and accurately file your taxes whether you want to do your taxes yourself, want help along the way, or you want to fully hand them over to a TurboTax Live expert so you can get closer to your tax refund.
Check back with the TurboTax blog for the most up to date information on tax law changes.