Last Updated 2 years ago

As we continue our analysis of what to expect regarding your taxes, we will focus on several taxpayers’ profiles and which tax proposals would have the most dramatic impact on them. As I write this, the Republicans are inching their way to control the House of Representatives, which would create an atmosphere for the Trump Administration to have a “carte blanche” to push through its tax agenda. Here are a few of the first profiles that I wish to share, which are speculative and should not be taken as fact:

1. We are a young family with three children under 17. We both work and earn moderate salaries. What can we expect regarding The Child Tax Credit?

The most likely proposal regarding the Child Tax Credit (CTC) for families with young children would be based on the Tax Relief for American Families and Workers Act of 2024. This bipartisan bill, passed by the House of Representatives on January 31, 2024, aims to enhance the CTC and provide additional support to families.

Key Provisions of the Proposal:

• Incremental Increase in Refundable Amount: The maximum refundable portion of the CTC would rise from $1,600 per child to $1,900 retroactively for 2024 and rise to $2,000 in 2025. 
• Inflation Adjustment: The CTC would be adjusted annually for inflation, ensuring the credit maintains its value over time. 
• Income Calculation Flexibility: Families would have the option to use their income from the current or prior year to determine their CTC eligibility, accommodating those with fluctuating earnings.

2. I have been fortunate to accumulate significant wealth and have recently inherited money from my late parents. I am concerned about the exemption for U.S. estates going down. What might change now?

            Under the new Trump administration, the estate tax exemption is expected to:

• Remain at Current Levels: The historically high exemption, set at $13.61 million per individual in 2024, will likely be maintained, preventing a reversion to pre-2017 levels. 
• Potential for Permanent Extension: There is a possibility of making the current exemption levels permanent, eliminating the scheduled sunset at the end of 2025. 
• Consideration of Repeal: Discussions may include the complete repeal of the federal estate tax, effectively removing it as a consideration for estate planning. 

3. We are retirees fortunate to receive U.S. Social Security and pensions from Israeli insurance companies. Our Social Security is reduced due to our pensions. Is there any chance for relief from the Windfall Elimination Provision so our Social Security is not reduced?

Yes, there is currently a bill in the U.S. Congress to repeal the Windfall Elimination Provision (WEP). The bill is called the Social Security Fairness Act of 2023 (H.R. 82), and there is a good chance that this bill will become law.

Impact on a U.S. Citizen Living in Israel with an Israeli Pension:

• Increased Social Security Benefits: Repealing the WEP would result in higher Social Security payments for those living in Israel who receive Israeli pensions from salaries not covered by U.S. Social Security taxes. Currently, the WEP reduces benefits for such individuals. 
• Simplified Financial Planning: Without the WEP, you can predict your retirement income more accurately, facilitating better financial planning and reducing uncertainty regarding benefit calculations.
• Enhanced Retirement Security: Eliminating the WEP would provide greater financial stability for you, ensuring that you and your spouse will receive full benefits based on your U.S. earnings history, irrespective of Israeli pensions.

See Part 1-What to expect regarding U.S. taxes under the Trump Administration and Part 3-Taxes Under the Trump Administration.