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    The Federal Reserve cuts interest rates by a quarter point after election. Here’s what that means for you

    The Federal Reserve cut its benchmark rate by a quarter point, or 25 basis points, at the end of its two-day meeting.
    Economic anxiety was a prevailing mood heading into the U.S. presidential election. Lower borrowing costs may offer some relief to struggling Americans.

    The Federal Reserve Building in Washington, D.C.
    Joshua Roberts | Reuters

    The Federal Reserve announced Thursday that it will lower its benchmark rate by a quarter point, or 25 basis points, less than two days after President-elect Donald Trump won the 2024 election.
    Economic uncertainty was a prevailing mood heading into Election Day after a prolonged period of high inflation left many Americans struggling to afford the cost of living.

    But recent economic data indicates that inflation has been falling back toward the Fed’s 2% target, which paved the way for the central bank to trim rates this fall. Thursday’s cut is the second, following a half-point reduction Sept. 18.
    The federal funds rate sets overnight borrowing costs for banks but also influences consumer borrowing costs.
    More from Personal Finance:28% of credit card users are paying off last year’s holiday debtHoliday shoppers plan to spend more while taking on debt2 in 5 cardholders have maxed out a credit card or come close
    Since the central bank last met, the personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of just 2.1% year over year. 
    Even though the central bank operates independently of the White House, Trump has been lobbying for the Fed to bring rates down.

    For consumers struggling under the weight of high borrowing costs after a string of 11 rate increases between March 2022 and July 2023, this move comes as good news — although it may still be a while before lower rates noticeably affect household budgets.
    “The Fed raised rates from the equivalent of the ground floor to the 53rd floor of a skyscraper, now they are on the 47th floor and another rate cut will take us to the 45th floor — the view is not a whole lot different,” said Greg McBride, chief financial analyst at Bankrate.com.
    From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could begin to affect your finances in the months ahead.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.
    Annual percentage rates have already started to come down with the Fed’s first rate cut, but not by much.
    “Still, these are sky-high rates,” said Matt Schulz, LendingTree’s credit analyst. “While they’ll almost certainly continue to fall in coming months, no one should expect dramatically reduced credit card bills anytime soon.”
    Rather than wait for small APR adjustments in the months ahead, the best move for those with credit card debt is to shop around for a better rate, ask your issuer for a lower rate on your current card or snag a 0% balance transfer offer, he said.
    “Another rate cut doesn’t change the fact that the best thing people can do to lower interest rates is to take matters into their own hands,” he said.
    On the campaign trail, Trump proposed capping credit card interest rates at 10%, but that type of measure would also have to get through Congress and survive challenges from the banking industry.

    Auto loans

    Even though auto loans are fixed, higher vehicle prices and high borrowing costs have become “increasingly difficult to manage,” according to Jessica Caldwell, Edmunds’ head of insights.
    “Amid this economic strain, it’s clear that President Trump’s promises of financial relief resonated with voters across the country,” she said.
    The average rate on a five-year new car loan is now around 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.
    “As Americans seek a reprieve from the relentless pressures on their wallets, even a modest federal rate cut would be seen as a positive step in the right direction,” Caldwell said.
    Trump has supported making the interest paid on car loans fully tax deductible, which would also have to go through Congress.

    Mortgage rates

    Housing affordability has been a major issue due in part to a sharp rise in mortgage rates since the pandemic.
    Trump has said he’ll bring down mortgage rates — even though 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy. Trump’s victory even spurred a rise in the U.S. 10-year Treasury yield, sending mortgage rates higher.
    Cuts in the Fed’s target interest rate could, however, provide some downward pressure.
    “Continued rate cuts could begin to drive down mortgage rates, which have remained stubbornly high,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. As of the week ending Nov. 1, the average rate for a 30-year, fixed-rate mortgage is 6.81%, according to the Mortgage Bankers Association.
    Mortgage rates are unlikely to fall significantly, given the current climate, said Jacob Channel, senior economist at LendingTree.
    “As long as investors remain worried about what the future may bring, Treasury yields, and, by extension, mortgage rates are going to have a tough time falling and staying down,” Channel said.

    Student loans

    Student loan borrowers will get less relief from rate cuts. Federal student loan rates are fixed, so most borrowers won’t be immediately affected. With Trump’s win, efforts to forgive student debt are now likely off the table.
    However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates. As the Fed cuts interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz.
    Still, a quarter-point cut will only reduce monthly payments on variable-rate loans by “about $1 to $1.25 a month for each $10,000 in debt,” Kantrowitz said.
    Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment, and loan forgiveness and discharge options.
    Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
    As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are still paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
    “Yes, interest earnings on savings accounts, money markets, and certificates of deposit will come down, but the most competitive yields still handily outpace inflation,” McBride said.
    One-year CDs are now averaging 1.76% but top-yielding CD rates pay more than 4.5%, according to Bankrate, nearly as good as a high-yield savings account.
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    Capital gains tax hikes ‘entirely off the table’ under President-elect Trump, Republican Congress, economist says

    FA Playbook

    Vice President Kamala Harris proposed higher long-term capital gains tax rates for top earners during the campaign.
    But capital gains tax increases won’t happen under President-elect Donald Trump and a Republican-controlled Congress, policy economists say.
    Republicans secured control of the Senate on Tuesday and could maintain a narrow majority in the House of Representatives.

    Former U.S. President and Republican presidential candidate Donald Trump speaks during an election night event at the West Palm Beach Convention Center on Nov. 6, 2024.
    Jim Watson | Afp | Getty Images

    President-elect Donald Trump’s victory means higher individual taxes, including levies on investments, are less likely for top earners, experts say.
    Vice President Kamala Harris proposed higher long-term capital gains tax rates during her campaign — raising the top rate to 28% from 20% — for those making more than $1 million annually. Long-term capital gains rates apply to assets owned for more than one year.

    Harris’ plan veered from President Joe Biden’s 2025 fiscal year budget, which called for 39.6% long-term capital gains taxes on the same top earners. 
    Higher capital gains tax rates, however, are “entirely off the table,” under a Trump presidency and Republican-controlled Congress, said Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy. 

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    Republicans secured control of the Senate on Tuesday and could maintain a narrow majority in the House of Representatives, which creates a “trifecta” in the White House and both chambers of Congress.
    Even with partial Republican control, “it’s most likely that capital gains tax policy just stays put where it is,” York explained.
    For 2024, investors pay long-term capital gains rates of 0%, 15% or 20%, depending on taxable income. Assets owned for one year or less are subject to regular income taxes.

    You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income. The taxable income thresholds will increase in 2025.

    Changes to ‘net investment income tax’

    Higher earners also pay the net investment income tax, or NIIT, of 3.8% on capital gains, interest, dividends, rents and more once modified adjusted gross income exceeds certain thresholds.
    The MAGI limits for NIIT are $200,000 for single filers and $250,000 for married couples filing together and don’t adjust for inflation. Combined with long-term capital gains taxes, higher earners currently pay up to 23.8% on investments.
    “Republicans may try to get rid of the net investment income tax,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
    But “that’s a big item” that could add significantly to the federal budget deficit, he said.
    The deficit topped $1.8 trillion in fiscal 2024.   More

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    Will you have a lower tax rate in retirement? Maybe not, financial advisors say

    FA Playbook

    Most people will have a lower tax rate in retirement versus their working years, according to financial advisors and researchers.
    However, some retirees won’t be as lucky due to factors like large required minimum distributions from 401(k) plans and individual retirement accounts, advisors said. Others may withdraw more taxable income to fund a “period of jubilation.”
    Considering tax rates can be important for a long-term financial plan.

    Laylabird | E+ | Getty Images

    Most Americans will have a lower tax burden in retirement than during their working years.
    However, that may not be the case for some retirees, especially for higher earners and big savers, which could have a significant impact on their financial plans, according to financial advisors.

    “Substantial evidence” suggests retirees have lower tax rates than during their working years, according to a 2024 paper published by the Center for Retirement Research at Boston College.
    There are a few general reasons for this, according to a joint 2017 research paper by the Internal Revenue Service and Investment Company Institute: People who leave the workforce no longer pay payroll taxes. Their household income often drops, generally meaning less income is taxed. And Social Security recipients only pay tax on a portion of their benefits.

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    The “overwhelming majority” of people will have a lower tax rate in retirement, “hands down,” said Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis and chief planning officer at Buckingham Wealth Partners.
    But that’s not always the case.

    Required minimum distributions may be large

    Those who’ve built up a sizable nest egg, perhaps with disciplined saving in a 401(k) plan or individual retirement accounts, may have large required minimum distributions, Levine said.

    For example, the IRS requires that older investors take minimum withdrawals annually from “traditional” (i.e., pre-tax) retirement accounts when they reach a certain age. (It’s age 73 for those who turned 72 after Dec. 31, 2022.)
    The total amount is based on an IRS formula. A bigger nest egg generally corresponds to a larger RMD.
    This matters because RMDs from pre-tax accounts add to a household’s taxable income, thereby raising its total tax bill. By contrast, distributions from Roth accounts aren’t taxable, with some exceptions.
    Investors held $11.4 trillion in traditional IRAs in 2023, about eight times more than the $1.4 trillion in Roth IRAs, according to the Investment Company Institute.
    Additionally, investors who inherited a retirement account, perhaps from a parent, may have to empty the account within 10 years of the owner’s death, Levine said. Such withdrawals from a pre-tax account would further add to taxable income.  

    Retirees may not want to shrink their lifestyle

    Aside from required withdrawals, big savers may choose to pull ample sums from their accounts to fund their retirement lifestyles, said Ted Jenkin, a certified financial planner based in Atlanta and the founder of oXYGen Financial.
    In such cases, their taxable income may exceed that of their working years, said Jenkin, a member of the CNBC Financial Advisor Council.

    “Most clients we sit down with today don’t want to see a diminished amount of income when they retire,” Jenkin said. “They still want to take the same level of trips, level of going out to concerts and dining, taking care of grandchildren, and many are still carrying a mortgage into retirement.”
    In the first three to five years of retirement, Jenkin actually finds clients generally spend more than they do during their working years due to what he calls “a period of jubilation.”
    “A lot of people just don’t want to shrink their lifestyle,” he said.

    Consider your income tax assumptions

    Investors should consider the income-tax assumptions they’re making for retirement — or ask their financial advisor what tax assumptions they’re making in clients’ financial plan, Jenkin said.
    Such assumptions could have a big financial impact, akin to the difference between using a 3% versus 4% average inflation rate when modeling the relative success of a long-term financial plan, he said.
    He advocates for planning conservatively. Planning for a tax rate that’s too low may raise the risk of running out of money in retirement, he explained.
    “You always have to plan everything on an after-tax basis,” Jenkin said.
    Of course, it’s impossible to determine future tax rates.
    Congress may change the tax code, for example. To that point, there’s tax fight looming next year that could impact things like the size of the standard deduction and marginal income-tax rates.
    That said, even if Congress were to increase the marginal income-tax brackets in the future, most retirees would likely still see their “personal tax rates” fall versus their working years, Levine said. More

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    Is the ‘vibecession’ here to stay? Here’s what experts say

    “Vibecession” is the disconnect between how well the economy is doing and how people feel about their financial standing.
    Nearly half, 45%, of voters say they are financially worse off now than they were four years ago, according to NBC News exit poll data.
    Yet economic metrics show otherwise.

    Some consumers have been weighed down by a “vibecession” for a while now — and those feelings might get worse, experts say.
    A vibecession is the disconnect between consumer sentiment and economic data, said Kyla Scanlon, who coined the term in 2022. Scanlon is the author of “In This Economy? How Money and Markets Really Work.”

    “It’s this idea that economic data is telling us one story and consumer sentiment is telling us another,” she said to CNBC.
    Nearly half, 45%, of voters say they are financially worse off now than they were four years ago, and the highest rate since 2008, according to NBC News exit poll data.
    Yet economic metrics show the economy is booming. Inflation, while it’s still a burden for consumers, has slowed down significantly. While some warning signs have popped up in the job market, to some degree conditions are normalizing from the red-hot market of a few years ago.
    “The economy is so extraordinarily personal, and people really hate inflation,” said Scanlon. “That’s what we saw in this presidential election.”
    More from Personal Finance:Presidential election prompts some Americans to ‘doom spend’The next president could face a tax battle in 2025 — what it means for investorsWhy voters ages 50 and up may decide the 2024 presidential election

    Even if the economy stays on track, Americans will likely continue to feel a vibecession, experts say.
    The vibes might actually get worse, depending on what policies President-elect Donald Trump enacts, said Jacob Channel, senior economist at LendingTree. High-rate tariffs on imported goods will likely wipe out progress made to reduce inflation.
    “If Donald Trump as president enacts the economic policies that he proposed as a candidate, we’re not only going to have a vibecession, we’re going to have a real recession,” Channel said.

    Inflation and the labor market

    Inflation, or the rate at which prices for goods and service increase over time, has come down — which means prices are still rising, but at a slower pace. Prices overall remain high, said Brett House, economics professor at Columbia Business School.
    “Americans’ lingering frustration with the economy and their personal circumstances appears rooted in the persistently high prices that remain post-pandemic,” he said. “This makes for daily sticker shocks when buying groceries, getting a burger, paying rent and filling up the car.”
    The consumer price index, a gauge measuring the costs of goods and services in the U.S., grew to a seasonally adjusted 0.2% in September, putting the annual inflation rate at 2.4%, according to the Bureau of Labor Statistics.

    While the Federal Reserve is still concerned about inflation, “we’re seeing these signs of weakness in the labor market,” Scanlon said.
    The quits rate was 3.1 million in September, a 1.9% decrease from a month before, the Bureau of Labor Statistics reported. There’s also a slowdown in hiring. The economy only added 12,000 jobs in October, the BLS reported. That’s less than the forecast of a 100,000 increase and lower than the 223,000 jobs added in September.
    To be sure, “a lot of this is just simply normalization after the distortions that occurred after the Covid shutdowns,” said Mark Hamrick, senior economic analyst.
    Additionally, the unemployment rate continues to hold steady at 4.1% and wage growth is up 4% from a year prior. “This suggests that the labor market remains firm despite signs of weakening,” JPMorgan noted.

    ‘What the bond market is telling us’

    The stock market rallied after the presidential election results. Just before the close on Wednesday, the Dow Jones Industrial Average had surged more than 1,500 points to a record high. The S&P 500 also popped more than 2%, while the tech-heavy Nasdaq Composite jumped 2.9% — both to record highs.
    U.S. bond yields also rose. The 10-year Treasury yield jumped 15 basis points on Wednesday closing to trade at 4.43%, hitting its highest level since July, as investors bet a Trump presidency would increase economic growth, along with fiscal spending.
    The yield on the 2-year Treasury was up by 0.073 basis point to 4.276%, reaching its highest level since July 31.
    That could be a warning sign, Scanlon said: “I don’t think the inflation story is over yet. That’s what the bond market is telling us.”
    Depending on what policies are enacted under Trump’s second term, the inflation problem might get worse, experts say.

    “When we see Treasury yields rising [and] the possibility of another $7 [trillion] to $10 trillion added to federal debt, those are not anti-inflationary moves, nor are mass deportations,” Hamrick said.
    Trump has proposed a 10% to 20% tariff on all imports across the board, as well as a rate between 60% and 100% for goods from China. Such moves “will be inflationary,” Scanlon said. On top of that, his fiscal plan could potentially add $7.75 trillion in spending through fiscal 2035, according to the Committee for a Responsible Federal Budget.
    “Who knows what will actually get passed from this fiscal plan, but massive tax cuts and tariffs … it’s expensive, and the bond market’s telling us that,” she said.

    ‘Vibecessions’ going forward

    According to the National Bureau of Economic Research, a recession is “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The last time this occurred was at the onset of the pandemic in 2020.
    However, it doesn’t necessarily take for these conditions to occur for consumers to feel negative about the economy. It can be “very difficult to square” what people are feeling in their everyday lives versus national averages and medians, experts say.
    “There’s still going to be that continued disconnect between how people feel and what the economy is doing,” Scanlon said.
    To that point, “the vibecession will endure,” Channel said.
    And if consumers end up having to deal with extra costs associated with tariffs every time they go to the grocery store, “the vibes might actually start to get a whole heck of a lot worse,” Channel added.

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    Thursday’s big stock stories: What’s likely to move the market in the next trading session

    A trader wearing a Trump hat works on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Nov. 6, 2024.
    Bloomberg | Bloomberg | Getty Images

    Stocks @ Night is a daily newsletter delivered after hours, giving you a first look at tomorrow and last look at today. Sign up for free to receive it directly in your inbox.
    Here’s what CNBC TV’s producers were watching as the major averages jumped to fresh all-time highs, and what’s on the radar for the next session.

    The Trump rally

    If you missed it the Russell 2000 picked up 5.84% on Wednesday, hitting a new 52-week high.
    The Dow Jones Industrial Average was up 3.57%, hitting a fresh all-time high.
    The Nasdaq Composite was up 2.95% Wednesday, posting a new record.
    The S&P 500 was up 2.53%, also hitting a new high
    We’ll follow these market stories closely to see if the move higher can continue.

    Stock chart icon

    The S&P 500 in 2024

    Sector check

    Financials were the biggest sector mover Wednesday, up 6.16%, hitting a new high.
    Industrials were up 3.93% Wednesday, hitting a new high.
    Energy was up 3.54% in the session. It’s now 4.28% from the April high.
    Real Estate fell 2.64% during trading. It’s now 5.6% from the high. 
    Consumer Staples fell 1.5%. The sector is 5.76% from the September high.
    Utilities fell 1%. It’s now 5.72% from the mid-October high.
    Duke Energy reports Thursday morning. The stock is flat over the past three months, and it is 6.3% from the October high.

    The transports

    Stock chart icon

    ArcBest shares in 2024

    Mortgage rates

    CNBC TV’s Diana Olick will be tracking the numbers.
    The 10-year Treasury note yield rose to 4.43% Wednesday.
    The SPDR S&P Homebuilders ETF (XHB) is up more than 2% so far this week.
    Lennar fell 4.8% in the session. The stock is 13% from the September high.
    D.R. Horton dropped 3.8% Wednesday. The stock is 16.6% from the 52-week high.
    PulteGroup fell 3% during the day. The stock is 13.6% from the October high.
    KB Home fell 2.6%. The stock is 11% from the September high.
    Taylor Morrison dropped 1.44% Wednesday. The stock is 1.8% from the September high.

    Lyft

    The ride-sharing company reported Wednesday afternoon.
    CEO David Risher will be on “Squawk Box” in the 8 a.m. hour, Eastern.
    The stock is 31% higher over the past three months.
    Lyft is still 30% from the March high.

    Stock chart icon

    Lyft in the past three months

    Arm Holdings

    The new chipmaker on the block, relatively speaking, reported quarterly earnings Wednesday afternoon.
    CEO Rene Haas will be on CNBC TV in the 10 a.m. hour.
    Arm is up roughly 28% in the past three months
    The stock is 23% from the July high.

    Hershey

    The chocolate company is down 11% over the past three months.
    Hershey is 16.6% from the May high.

    Stock chart icon

    Hershey shares in 2024

    Carlyle Group

    The global investment firm is up about 38% in the past three months.
    Carlyle hit a new high Wednesday.

    Datadog

    The cloud company reports Thursday before the bell.
    The stock is up around 22% in the past three months.
    Datadog is 7.4% from the February high.

    Cloudflare

    The company reports Thursday after the bell.
    Cloudflare is up 21% in three months.
    The stock is 20% from the February high. More

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    Global ETFs slide as investors see Trump tariff policies hurting trade

    Funds tracking international equities largely pulled back as investors reacted to Donald Trump’s win.
    It marks a stark contrast to rallying U.S. equities.

    A balcony above a trading floor inside the Euronext NV stock exchange in Paris on March 13, 2023.
    Nathan Laine | Bloomberg | Getty Images

    Several U.S.-listed funds tracking global stocks pulled back in Wednesday’s session as investors considered Donald Trump’s victory harmful to international equities.
    Closely followed exchange-traded funds from iShares tracking South Korea, Hong Kong, Taiwan and Chile all slid on Wednesday. That comes despite major U.S. indexes soaring to record highs.

    Those idiosyncratic pullbacks come as traders ready for President-elect Trump’s proposed policies for taxing imports. He has floated a tariff of up to 20% on all goods coming into the U.S., with an especially high 60% levy on those coming from China specifically.
    This policy was unpopular among voters, according to NBC News polling. But it appeared inconsequential in the race, despite the economy more broadly being a main issue for Americans heading to the polls.
    “While the investing landscape remains favorable in the U.S., international markets are very exposed to tariff policy, ” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “That uncertainty could limit near-term upside in global stocks.”
    These moves reflect the divergence between U.S. and international markets as investors around the globe take in America’s election results.
    While the Dow Jones Industrial Average notched its best day in around two years, European markets largely struggled on Wednesday as it become clear that Trump would prevail. In the U.S. market, the iShares Core MSCI Europe ETF (IEUR) slid more than 2%.

    Asia-Pacific markets were more mixed, with Japan’s Nikkei 225 bucking the downtrend. Still, the U.S.-listed iShares MSCI China ETF (MCHI) shed more than 2% on Wednesday.
    However, the Global X MSCI Argentina ETF (ARGT) climbed around 3% and touched a new 52-week high, a rare bright spot among international-focused funds. The South American country last year elected libertarian Javier Milei, who was compared widely to Trump, as president.
    The ICE U.S. Dollar Index, which tracks to the U.S. greenback against a basket of international currencies, reached its highest level since July. LPL Financial chief technical strategist Adam Turnquist noted that the dollar’s rally comes as inflation expectations rose following Trump’s victory.
    Turnquist said continued strength in the American currency can hurt international stocks, particularly emerging markets. These markets have underperformed U.S. counterparts in recent years. Indeed, the iShares MSCI Emerging Markets ETF (EEM) slid more than 1% on Wednesday.
    — CNBC’s Sarah Min, Jesse Pound and Hakyung Kim contributed to this report.

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    Here’s what a Trump presidency could mean for your taxes

    FA Playbook

    Former President Donald Trump has defeated Vice President Kamala Harris to win the White House, which could broadly impact taxpayers.
    Trump wants to fully extend tax breaks enacted in 2017, including lower tax brackets, a higher standard deduction, a more generous child tax credit and other provisions.
    He also floated several new ideas on the campaign trail, but most proposals would require approval from Congress.

    Republican presidential nominee and former U.S. President Donald Trump holds a rally in Saginaw, Michigan, U.S., October 3, 2024. Democratic presidential nominee U.S. Vice President Kamala Harris and Vice-Presidential candidate Tim Walz speaks during a campaign rally and concert in Ann Arbor, Michigan, U.S. October 28, 2024.
    Brendan McDermid | Evelyn Hockstein | Reuters

    Former President Donald Trump has defeated Vice President Kamala Harris to win the White House, which could broadly impact taxpayers — but the details remain unclear, according to policy experts.
    Enacted by Trump in 2017, the Tax Cuts and Jobs Act, or TCJA, will be a key priority for the president-elect in 2025. The law brought sweeping changes, including lower tax brackets, higher standard deductions, a more generous child tax credit and bigger estate and gift tax exemption, among other provisions.

    Those individual tax breaks will sunset after 2025 without action from Congress, which could trigger higher taxes for more than 60% of taxpayers, according to the Tax Foundation. However, Trump wants to fully extend expiring TCJA provisions.

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    Plus, most of Trump’s tax policy requires Congressional approval, which could be challenging, depending on control of the Senate and House of Representatives and support within the Republican party.
    While Republicans secured a Senate majority, control of the House remains uncertain. If Democrats flip the House, we could see “more gridlock” in Congress, which could stall Trump’s agenda, Gleckman explained.

    The ‘budget math’ will be harder in 2025

    Tax negotiations could also be tough amid growing concerns about the federal budget deficit, according to Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy. 
    “The budget math is a lot harder this time around than it was back in 2017,” with higher interest rates and a bigger baseline budget deficit, she said. The deficit topped $1.8 trillion in fiscal 2024. 
    Fully extending TCJA provisions could decrease federal revenue by $3.5 trillion to $4 trillion over the next decade, depending on the scoring model, according to the Tax Foundation.   More

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    Trump promised no taxes on Social Security benefits. It’s too soon to plan on that change, experts say

    President-elect Donald Trump has promised to eliminate taxes on Social Security benefits.
    Even with a Republican majority in Congress, that proposal could face hurdles.
    Experts say it’s still too early to factor that change into financial plans.

    Republican presidential nominee and former U.S. President Donald Trump arrives to speak at his rally during the 2024 U.S. Presidential Election, in Palm Beach County Convention Center, in West Palm Beach, Florida, U.S., November 6, 2024.
    Brendan Mcdermid | Reuters

    On the campaign trail, Republican presidential candidate Donald Trump made a notable promise to retirees: No taxes on Social Security benefits.
    Now that Trump has won a second presidential term, that may prompt Social Security’s beneficiaries to wonder whether that change may come to pass.

    But nixing those taxes may be a difficult task, even if Trump has a Republican majority in both the Senate and the House of Representatives. Any changes to Social Security would require at least 60 Senate votes, and Republicans would therefore need some Democratic support to pass those changes.
    Just eliminating taxes on benefits, without any other changes to make up for that loss in revenues, would worsen the program’s current funding woes, experts say.
    “It’s hard for me to imagine that Democrats would be willing to provide votes to get over that 60-vote threshold and weaken Social Security solvency,” said Charles Blahous, senior research strategist at the Mercatus Center at George Mason University, who has also served as a public trustee for Social Security and Medicare.
    “I think a lot of Republicans would have heartburn about it, too,” he said.
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    Ending taxes on Social Security benefits — along with other Trump proposals to end taxes on tips and overtime, impose tariffs and deport immigrants — would “dramatically worsen” Social Security’s finances, the Committee for a Responsible Federal Budget found in a recent report.
    The Trump campaign has pushed back on those findings, calling the Committee for a Responsible Federal Budget “consistently wrong” in a statement to CNBC when the report was released.
    The campaign did not respond to a request for comment on Wednesday, about where the proposal stands on Trump’s priority list following his inauguration.
    The Social Security trust fund used to help pay retirement benefits is projected to run out in 2033, according to the program’s actuaries. At that time, beneficiaries could see across-the-board benefit cuts, though the president may have the ability to determine how those reductions are distributed among beneficiaries, according to recent research.

    Higher-income seniors would benefit most

    Experts say those who would benefit most from eliminating taxes on Social Security benefits would be the wealthy.
    Households with between $63,000 and $200,000 in income would benefit most from the change, according to an August analysis from the Urban-Brookings Tax Policy Center.
    Lower income households making $32,000 or less would not get a tax cut, as most of their Social Security benefits are not currently taxed. Meanwhile, those with between $32,000 and $60,000 in annual income may see about $90 in tax cuts, according to the research.
    “You’re giving a tax break to the higher-income senior population, so that might wind up mitigating its political sale ability as well,” Blahous said.

    Currently, up to 85% of Social Security benefits may be taxed based on an individual’s or married couple’s income. Those taxes are determined based on a formula called combined income, or the sum of adjusted gross income, nontaxable interest and half of Social Security benefits.
    Individuals face up to 85% in taxes on their benefits if they have more than $34,000 in combined income; for married couples that applies if their combined income is more than $44,000.
    Individual beneficiaries may pay taxes on up to 50% of their benefits on combined income between $25,000 and $34,000, or for married couples with between $32,000 and $44,000.
    Because those thresholds are not adjusted, more Social Security benefit income becomes subject to income taxes over time.

    For now, financial advisors say it is too early to factor in the elimination of taxes on benefits into financial plans.
    “You don’t know what the law or policy is going to be if it hasn’t even been properly drafted yet, much less adopted,” said David Haas, a certified financial planner and owner of Cereus Financial Advisors in Franklin Lakes, New Jersey.
    “I wouldn’t jump to any conclusions,” he said. More