7 ways a Trump administration could affect your finances
CNN
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President-elect Donald Trump promised Americans he'd bring down consumer prices, make health care more affordable and protect Social Security. Now he has to follow through.
Concerns about inflation and the cost of living were central to Trump's victory in the US presidential election. According to CNN exit polls, 68% of voters said the economy was either poor or not good.
Much of the president's ability to impact economic policy depends on approval from Congress. Nonetheless, when Trump is inaugurated on January 20, he will be on the hook to make good on his promises.
Here are seven ways a Trump administration could affect your personal finances.
Child care
On the campaign trail, Trump suggested expanding the child tax credit, which provides financial assistance to parents in the form of tax breaks. The policy platform linked on his website mentions expanding the child tax credit but does not include further details.
During Trump's first term, the 2017 Tax Cuts and Jobs Act temporarily expanded the child tax credit from $1,000 to $2,000. That credit is set to expire at the end of 2025, but with approval from Congress, Trump could extend the 2017 tax cuts or introduce a new policy.
Vice President-elect JD Vance has suggested expanding the child tax credit to $5,000. Trump has not commented on the proposal.
Maria Castillo Dominguez, a certified financial planner and founder of Valoria Wealth Management, told CNN that extending the credit is "vital" for many households, particularly those with young children, to be able to manage child care costs.
Karoline Leavitt, a spokeswoman for the Trump-Vance transition, said in a statement that Trump will make good on his campaign promises.
"The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail," Leavitt said. "He will deliver."
Taxes
The Trump administration is expected to focus on extending tax cuts introduced by the Tax Cuts and Jobs Act that are set to expire in 2025. The move will require approval from Congress.
Extending Trump's 2017 tax cuts would lower taxes by an average of $2,000 in 2026, according to an analysis by the Urban-Brookings Tax Policy Center. However, nearly half of the tax break benefits would go to the top 5% of households who make over $450,000.
For example, extending the tax cuts would save the top 1% of households about $70,000, or 3.2% of their income, according to the Tax Policy Center. By comparison, the tax cuts would save middle-income families about $1,000, or 1.3% of their income.
On the campaign trail, Trump touted ending double taxation on US citizens who live overseas but has not mentioned the topic much since. Additionally, he has not elaborated on his promise to make interest rates on auto loans tax-deductible.
Trump has suggested eliminating federal income tax entirely in favor of revenue from tariffs. Alan Auerbach, a professor of economics at UC Berkeley, told CNN that the proposal does not make financial sense. Revenue from tariffs is not enough to replace revenue from federal income tax, he said. "The numbers don't work for this."
Social Security
Trump promised not to "cut one penny" from Social Security, according to his policy platform.
Former US President Donald Trump, center, during a campaign event in Harrisburg, Pennsylvania, US, on Wednesday, July 31, 2024. Trump pledged to eliminate taxes on Social Security payments for seniors, a move that would cut levies for some elderly Americans but further strain benefits for those who have yet to retire.
Hannah Beier/Bloomberg/Getty Images
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But he has proposed eliminating federal taxes on Social Security, tips and overtime pay. Tax revenue is used to fund federal aid programs like Social Security.
Eliminating the taxes would provide short-term relief but deplete funds for Social Security, according to the Tax Policy Center, leading to reduced benefits for workers.
Households making $32,000 or less would not benefit from the federal tax cut because the majority of their Social Security income is not taxed, according to the Tax Policy Center.
Under Trump's proposal, the fund reserves for Social Security would run dry by 2031, according to the Committee for a Responsible Federal Budget. Additionally, there would be a 33% decrease in benefits for enrollees by 2035.
Student loan debt
Key aspects of the Biden administration's plan for student loan debt forgiveness hang in the balance, meaning the Trump administration could influence the outcome for millions of Americans who hope to have their debt canceled.
Efforts to forgive student loan debt, as attempted by the Biden administration, will likely be scrapped under Trump, according to Berkeley's Auerbach.
As of August, some of President Joe Biden's initiatives to relieve student loan debt remained blocked by a Supreme Court ruling.
"Republicans have been challenging those things in court, largely successfully, and I'm sure the sentiment in the Trump administration is going to be similar to that," Auerbach said. "They're not really that interested in providing student loan relief."
Trump's policy platform does not mention student loan debt. In his first term, he failed to end the Public Service Loan Forgiveness program.
Prices and inflation
Concerns about inflation helped send Trump back to the White House. Yet under his proposed policies, inflation could come roaring back.
Inflation ticked up to 2.6% in October, its first increase in six months, according to the Consumer Price Index. The bump up was in line with expectations, but it was also a signal that the beast of inflation is not entirely tamed.
Donald Trump highlighted rising costs during his campaign to return to the White House.
Jeenah Moon/Reuters
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Trump's proposed 10% to 20% tariffs on imports would lead to an increase in everyday consumer prices, according to a report by the National Retail Federation. For example, $90 athletic shoes could cost $106 to $116 under Trump's tariffs.
Additionally, Trump's proposal for mass deportations could increase food prices. Auerbach noted that undocumented immigrants often work in agriculture or food processing, portending for a labor shortage if they are deported.
Auerbach told CNN that the president-elect's plans for tariffs and mass deportations could have the most significant impact on peoples' finances.
"If those things actually come into effect as proposed, there are going to be big increases in the cost of living," he said.
Health insurance
On the campaign trail, Trump went back and forth on his approach to changing the Affordable Care Act. He has said he has "concepts of a plan" for health care.
The Trump administration wants to "promote choice and competition" and make health care more affordable, according to his policy platform. Yet it does not provide further details.
Americans enrolled in the ACA marketplace will likely see increases in health care costs after a key tax credit from the pandemic expires at the end of 2025.
As part of the 2021 American Rescue Plan Act, enhanced premium tax credits were introduced to decrease out-of-pocket costs for eligible ACA enrollees. These tax credits were expanded through 2025 as part of the 2022 Inflation Reduction Act.
A Republican-led Congress is likely to let the enhanced personal tax credits expire, according to KFF, a nonprofit health policy group. The credits save enrollees about $700 a year, according to KFF, and if they expire, about 19.7 million Americans will see spikes in health care expenses.
"Forthcoming policy proposals are likely to raise people's costs for health coverage, roll back protections for people with pre-existing conditions and increase the number of people without coverage," said Sarah Lueck, a vice president at the Center for Budget and Policy Priorities, a think tank.
Regarding Medicare, Trump will not "cut one penny" from the program, according to his policy platform.
"I think, at least in the short run, I don't expect any major cuts in Medicare benefits," Auerbach said, noting that Trump recognizes it's a popular program.
Housing
Trump's policy platform says his administration will promote homeownership "through tax incentives and support for first-time buyers." It also mentions opening "limited portions" of lands owned by the federal government for "new home construction." Trump has not elaborated on his platform.
The Trump administration will likely cut red tape to encourage business and real estate developments. Housing costs are often most impacted by local regulations instead of national policy, said Berkeley's Auerbach.
Trump's plan for mass deportations could shrink the labor force in the construction sector, putting strain on an already tight supply of housing and in turn causing higher prices, Auerbach said.
As for mortgages, more affordable rates could stem from the Federal Reserve's decisions on where to set interest rates, Auerbach said. The Fed's benchmark interest rate sets the cost of borrowing between banks and influences the interest rates paid by consumers on loans, credit cards and mortgages.
