Q&A: What Kind of Financial Changes Can I Expect This Year?
Q: The news is full of predictions and expectations for the economy in the coming year, and I’m not sure which of them are fact-based, and which are just pure speculation. What kind of financial changes can I really expect to see?
A: The news can be hard to follow at times where the economy is looking up one day, and said to be on a downward spiral the next. While no one can predict the future, there are several proposed financial policies that might impact individuals and businesses. Here’s an overview of what to expect and some practical steps you may need to take down the line.
Tax policies
- Tax Cuts and Jobs Act (TCJA) Expiring. The TCJA, enacted in 2017, introduced individual tax cuts that are set to expire at the end of 2025. The incoming president has indicated plans to make these tax cuts permanent, which would maintain the current lower individual tax rates beyond 2025. He has also made plans that would reduce the corporation tax to 20%, and potentially as low as 15% for companies that manufacture in the U.S.
- Estate and gift tax exemptions. The TCJA also increased estate and gift tax exemptions, which are scheduled to revert to lower thresholds after 2025. The administration may seek to extend these higher exemptions, affecting estate planning strategies. If the higher exemptions go through, be sure to review your estate plan to ensure it still meets your needs.
Trade policies
- Universal import tariffs. There have been plans proposed for implementing a universal baseline tariff on all U.S. imports, with specific higher tariffs on countries like China. The proposed tariffs are intended to encourage domestic production and reduce reliance on foreign goods. However, they can also result in higher costs for imported products, potentially affecting consumer spending and business supply chains.
Economic policies
- Infrastructure investment. The administration plans to invest in infrastructure projects, including the development of “freedom cities” and enhancements to national defense systems. These projects are expected to create jobs and stimulate economic growth.
- Energy policies. A focus on expanding fossil fuel exploitation is anticipated, which will aim to achieve energy independence and lower energy costs for the U.S. This may influence energy markets and environmental policies.
Healthcare policies
- Affordable Care Act (ACA) revisions. The administration has expressed intentions to modify or replace aspects of the ACA, which could affect healthcare coverage and costs for individuals and families. If the ACA is revised, be sure to confirm your healthcare coverage is still sufficient for your needs.
Regulatory policies
- Deregulation efforts. It is expected that there will be a continuation of efforts to reduce regulations across various industries, aiming to decrease business costs and promote economic growth. This could impact environmental standards, labor laws and consumer protections.
Financial markets
- Stock market focus. The incoming administration views the stock market as a key indicator of economic health and may implement policies to bolster market performance. If you have investments in the stock market, it’s important to monitor policy announcements that could influence market dynamics.
- Crypto winnings. Bitcoin prices spiked to record highs on election night and have continued rising since, clearly showing that some investors are very bullish about the incoming administration. The president has also suggested he plans to create a bitcoin strategic reserve similar to the U.S. government’s strategic oil reserve, which sent bitcoin prices soaring again.
As 2025 unfolds under the incoming administration, new economic policies are set to shape a fresh financial landscape. Staying informed can help you navigate these changes successfully. Use this guide to brush up on the important changes that may be taking place, and stay informed as the economy shifts so you can adapt and adjust as appropriate.