Tax Changes Ahead: What Parents, Tipped Workers, and EV Drivers Need to Know

As President-elect Donald Trump prepares to take office, the tax landscape is set to change significantly, with potential implications for parents, tipped workers, and electric vehicle (EV) drivers. Here's what you need to know about the proposed tax changes and how they could impact your finances.



Parents: Child Tax Credit Expansion

Trump has proposed expanding the Child Tax Credit, which could provide significant financial relief for families. The current credit is $2,000 per child, but Trump has suggested increasing it to $6,000 for newborns and $3,600 for children under 5 beginning in 2026. This expansion could help offset the cost of raising children and provide additional disposable income for families.

Tipped Workers: No Tax on Tips

Trump has also proposed eliminating federal income taxes on tipped wages, which could significantly increase the take-home pay of tipped workers. According to the Budget Lab at Yale, there were an estimated four million tipped workers in the United States in 2023, representing about 2.5% of the labor market. This proposal could directly benefit these workers by increasing their disposable income.



However, it's important to note that the elimination of payroll taxes on tips could also have implications for the funding of Social Security and Medicare. The Tax Foundation estimates that untaxed tip income could add $107 billion over the next decade to the federal deficit, which could potentially lead to cuts in these programs or increases in other taxes to make up for the lost revenue.

EV Drivers: Tax Credit for EV Purchases

Trump has proposed a tax credit for car purchases, which could include electric vehicles (EVs). This credit, combined with existing federal and state incentives, could make EVs more affordable for consumers. For instance, the current federal tax credit for EVs ranges from $2,500 to $7,500, depending on the vehicle's battery size. If Trump's proposed tax credit is added to this, the total credit could be substantial, making EVs more affordable for a larger number of consumers.

Moreover, the proposed tax credit for family caregivers could also indirectly influence EV adoption. If caregivers are able to save more money due to the tax credit, they might be more likely to invest in an EV, which could offer long-term savings on fuel and maintenance costs.

In conclusion, the proposed tax changes under Trump's administration could have significant implications for parents, tipped workers, and EV drivers. While these changes could provide financial relief and increased disposable income for these groups, it's essential to consider the broader implications for the federal budget and the potential impact on other taxpayers. As the details of these proposals become clearer, it will be crucial for individuals to assess the potential impact on their personal finances and make informed decisions about their financial future.