If you’ve been paying attention to former President Donald Trump’s election campaign, you may have noticed—among other things—that Trump has proposed a lot of tax breaks. Among other things, he’s promised to make car loans tax-deductible, make tips non-taxable, and end double taxation for U.S. citizens living abroad. 

But just how feasible are these tax breaks? Let’s “break” it down.

How much would Trump’s tax cuts cost?

Economic analysts have estimated that Trump’s tax cut proposals could cost anywhere from $6 trillion to $10 trillion over a period of 10 years. That final number largely depends on which ones get implemented and how. Meanwhile, economists have warned that Trump’s plans for tariffs could raise prices across the U.S. and increase inflation in 2025 by 2% more than already expected.

It’s easy to see why Trump is proposing these tax cuts. He’s trying to appeal to very specific demographics: Americans living abroad, those taken aback by sky-high car prices (currently up 13%), recipients of Social Security, and tipped and hourly employees. The problem is, that Trump never gives details about how he’d pay for and implement these tax breaks. And the money has to come from somewhere.

Why ARE car prices so high?

Trump’s promise to make car loans deductible hits on a pain point many Americans are dealing with right now. With rising inflation, car prices have risen by 18% since 2021, although they’re currently down to just 13% above the 2021 rates. That’s still a high enough number to cause concern.

Meanwhile, in an attempt to stave off inflation, the Federal Reserve has continued to increase interest rates, driving up car loan rates. In the third quarter of 2024, five-year car loan rates climbed to 8.4%, which is 4.5% more than this time two years ago.

Would these tax cuts actually help taxpayers?

Trump’s proposals would definitely have an impact on national revenue: reducing tax revenue by over $100 billion in the course of 10 years. But would it help American citizens? Assuming the car loan deduction would only be available for taxpayers itemizing their deductions, which seems most likely, the answer is no. Only about one-fifth of American taxpayers would be able to claim the deduction.

While ending double taxation for American citizens living abroad is something that groups like Republicans Overseas have long been pushing for, it’s unclear how many U.S. citizens would actually benefit. This tax cut could have a positive effect on wealthy citizens, allowing them to live abroad without fear of paying taxes twice. But it would have to be carefully implemented to prevent tax avoidance, and it could come at a steep price for the U.S. government.