Key Policy Changes in 2025 Impacting Your Financial Planning

As 2025 approaches, policy shifts under a new Trump administration are taking shape. For investors, understanding the new tax, healthcare, and retirement landscape is crucial to navigating the future.

Here are some of the most impactful potential policy changes and how they may influence your financial planning.

Tax Reform

One primary goal is the continuation of tax reforms, including the Tax Cuts and Jobs Act (TCJA). Income tax rates were lowered during the first Trump administration, and he intends to make the rates permanent.

Trump has also proposed restoring the state and local tax deduction and eliminating federal taxes on Social Security, tips, and overtime pay. While helpful for those with large state or property tax bills and the bottom line of many hourly workers, concerns have been raised about the impact on the federal deficit and the viability of Social Security these tax reductions will produce.¹ Regardless of the impact, accelerating income looks like an effective planning strategy.

Reducing the corporate tax rate to below 20% is another goal, aiming to boost U.S. competitiveness. In conjunction, Trump has floated enacting tariffs up to 20% on many countries, up to 60% on Chinese goods, and up to 100% on Mexican imports to bolster U.S. businesses. While many assert broad implementation of new tariffs will be felt most by domestic consumers through increased prices and negative impacts on GDP, business owners may consider adjusting their investment or expansion plans to align with these incentives.²

Estate and gift tax policies may also see adjustments to maintain or increase the lifetime exemption (currently approaching $14M per person), which would benefit wealthy families planning to transfer assets. Additional changes to the stepped-up basis or the grantor trust rules no longer appear to be on the horizon. Taken together, the continuation of current rules adds confidence to the viability of estate plans already in place.

Healthcare Changes

The new administration is pushing for an overhaul of the Affordable Care Act, rolling back the expansion of Medicaid, and revisiting the broader use of Health Savings Accounts, which could play a significant role in financial planning.

Most of the comments made during Trump’s campaign were light on details, but the deregulation of the health insurance market and elimination of the expansion of Medicaid were specifically noted.³ Since promoting private options has been a cornerstone of the concepts outlined in conservative healthcare proposals dating back to Trump’s previous administration, an element of any new plan may include alterations to HSAs. Earlier proposals included increases to the HSA contribution cap to allow people to save more for out-of-pocket healthcare costs on a tax-advantaged basis and decoupling HSAs from high-deductible health plans to increase accessibility. It remains to be seen what legislative changes are coming. Still, any shift affecting the availability and cost of healthcare could impact individuals’ finances and increase the need for retirement savings strategies to cover ongoing and potential long-term care expenses.

Retirement Savings

With federal deficits expected to increase due to Trump’s tax and tariff policies⁴, it appears taxes will have to rise at some point. However, the extension of tax cuts buys time to take advantage of current low rates to position retirement portfolios to minimize tax impacts long-term.

Contributing to Roth IRAs, Roth 401(k)s, or making Roth conversions over the next few years should be a formula for financial success. Shifting retirement savings out of traditional 401(k) and IRA accounts now avoids higher income tax rates that may be necessary in the future.

Planning for 2025 and Beyond

The policy changes under the Trump administration present opportunities and challenges for financial planning. The best path forward is a tailored, informed approach that awaits details of changes as they develop, adapting strategies as necessary during a shifting legislative landscape.

^{1 https://taxfoundation.org/research/all/federal/donald-trump-tax-plan-2024/}

^{2 https://taxfoundation.org/blog/trump-tariffs-impact-economy/}

^{3 https://www.cbpp.org/blog/trump-republican-congress-health-care-proposals-could-pose-risks-to-access-and-affordability}

^{4 https://taxfoundation.org/blog/trump-tax-cuts-tariffs-reconciliation/}