Anaya Nolan
President Trump's One Big Beautiful Bill Act, passed in July 2025, has made permanent many of the tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), which were set to expire at the end of 2025. The new law includes tax breaks for the ultra-rich, small business investors, and entrepreneurs, while cutting funding for programs that most Americans rely on. While those making $30,000 a year or less will see a tax increase from 2029 onwards, the top 0.1% will enjoy an average annual tax cut of $309,000. With the new legislation, the state and local tax (SALT) deduction limit will increase from $10,000 to $40,000 for married couples filing jointly, before reverting to $10,000 in 2030. The standard deduction will also increase to $15,750 for single filers and $31,500 for joint filers, with these amounts indexed for inflation after 2025. The new tax law will also modify individual income and estate tax provisions, with higher standard deductions, lower tax brackets, and higher gift and estate tax exemptions. These changes will have a significant impact on tax planning strategies and affect taxpayers when they file their returns in 2026 and beyond.
Explore related products
What You'll Learn
- The SALT deduction cap increases to $40,000 for certain taxpayers
- The Child Tax Credit (CTC) amount permanently doubles to $2,000 per child
- The 20% pass-through deduction for business income is extended and expanded to 23%
- The lifetime exclusion amount on estates increases to $15 million per individual
- The standard deduction rises to $15,000 for single taxpayers
The SALT deduction cap increases to $40,000 for certain taxpayers
The SALT (State and Local Tax) deduction cap has been a contentious issue, with the initial limit set at $10,000 through 2025. The new legislation, passed by Senate Republicans, increases this cap to $40,000 for certain taxpayers starting in 2025, with a phaseout beginning after $500,000 in income. This change is part of President Donald Trump's multitrillion-dollar spending bill, also known as the "One Big Beautiful Bill Act" or "megabill."
The SALT deduction cap increase to $40,000 is expected to benefit six-figure households in high-tax states like New York, California, New Jersey, and Connecticut. However, low- and middle-income households are not expected to benefit significantly, as most don't have $40,000 in SALT liability. Additionally, the standard deduction, which was doubled by the Tax Cuts and Jobs Act (TCJA) in 2018 and adjusts for inflation annually, may still outweigh any itemized deductions for households with more modest incomes.
The $40,000 SALT cap and $500,000 income threshold will increase by 1% each year from 2026 through 2029, with the cap reverting to $10,000 in 2030. This gradual increase provides a temporary tax advantage for those within the income threshold. It's worth noting that the House version of the bill preserved a loophole, known as the pass-through entity tax (PTET), allowing certain taxpayers to avoid the cap at the state level.
While the SALT deduction cap increase may provide some tax relief for certain taxpayers, it's important to consider the broader implications of the tax laws. President Trump's bill has been criticized for providing massive tax breaks to the wealthiest Americans while cutting programs that many Americans depend on, including healthcare, food assistance, and public safety. Starting in 2029, those earning $30,000 or less will face a tax increase, while the top 0.1% will receive an average tax cut of $309,000.
Dealing with Grief: Supporting Your Partner After Loss
You may want to see also
Explore related products
The Child Tax Credit (CTC) amount permanently doubles to $2,000 per child
The Child Tax Credit (CTC) was doubled from $1,000 to $2,000 per child under the Tax Cuts and Jobs Act (TCJA) of 2017. This legislation also allowed for a refundable credit of up to $1,400, indexed to inflation. Dependents who did not qualify for the $2,000 credit could receive a nonrefundable credit of up to $500. The American Taxpayer Relief Act of 2012 had previously increased the CTC from $500 per child to $1,000 per child.
The 2017 TCJA legislation was temporary and is set to expire after 2025. After this, the CTC will revert to its pre-TCJA form, with a credit of up to $1,000 for each child under 17 and a 5% reduction for adjusted gross income over $75,000 ($110,000 for married couples). If the credit exceeds taxes owed, taxpayers can receive the balance as a refund, known as the Additional Child Tax Credit (ACTC).
The ACTC is limited to 15% of earnings above $2,500 or $3,000, depending on the source. Families with children in all income groups benefited from the $2,000 CTC, but low-income families were least likely to qualify for the full credit. The average credit for the lowest income quintile was $1,460.
In 2025, the CTC was increased to $2,200 per child under President Trump's "One Big Beautiful Bill" (OBBB). This legislation also tightened eligibility requirements by mandating that both parents and children have Social Security numbers to claim the credit. This change may have impacted immigrant and mixed-status families.
Vehicle Laws: Who Makes the Rules?
You may want to see also
Explore related products
The 20% pass-through deduction for business income is extended and expanded to 23%
The 20% pass-through deduction for business income, also known as the QBI (Qualified Business Income) deduction, was established by the Tax Cuts and Jobs Act (TCJA) in 2018. This deduction allows owners of pass-through businesses, such as sole proprietorships, partnerships, and limited liability companies (LLCs), to deduct up to 20% of their QBI, reducing their effective income tax rate. The QBI deduction was set to expire at the end of 2025 unless extended by Congress.
In 2025, the House Republicans proposed the "One Big Beautiful Bill Act," which aimed to make the QBI deduction permanent and expand the maximum tax break to 23% starting in 2026. This change would effectively increase the tax benefit for high-income earners, including those in certain industries like law and finance. The proposal would also eliminate the phase-out cap, providing a bigger tax break for certain business owners.
The QBI deduction has been controversial due to its disproportionate benefit for high-income taxpayers. According to the Tax Foundation's Center for Federal Tax Policy, "most of the benefits flow to taxpayers with a lot of income," such as business owners who receive profits on their individual tax returns. The extension and expansion of the QBI deduction to 23% is expected to provide even greater tax advantages to these high-income individuals.
While the initial proposal was made by the House Republicans, the final version of the bill passed in the Senate. This version retained a loophole, known as the pass-through entity tax (PTET), which allows pass-through owners and partners in various industries to avoid the cap at the state level. The Senate bill also included changes to qualified small business stock (QSBS) thresholds and exclusions, further benefiting small business investors.
The "One Big Beautiful Bill" has been criticized by some as a massive tax break for the wealthiest Americans, including investors in small businesses and those earning over $1 million per year. These tax cuts for the rich come at the cost of programs and services relied upon by everyday families, including healthcare, food assistance, and public safety. The bill also includes a tax hike for parents paying for childcare, further impacting families.
Informed Consent Law: A Historical Perspective
You may want to see also
Explore related products
The lifetime exclusion amount on estates increases to $15 million per individual
The "One Big Beautiful Bill Act", passed in July 2025, introduces several changes to tax laws, some of which will affect the wealthy. One notable change is the increase in the lifetime exclusion amount on estates to $15 million per individual starting in 2026. This represents a significant increase from the 2025 exclusion amount of $13.99 million per individual. The new legislation will also adjust this amount annually to account for inflation.
The increase in the lifetime exclusion amount on estates is part of a broader set of changes to individual income and estate tax provisions included in the new tax law. Specifically, the law modifies and makes permanent certain provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were initially set to expire at the end of 2025. By extending these provisions, the new tax law provides additional tax benefits to wealthy individuals.
The $15 million lifetime exclusion amount on estates offers substantial advantages to high-net-worth individuals. It allows them to transfer a more considerable amount of wealth to their heirs without incurring estate taxes. This provision effectively reduces the tax burden on the transfer of large estates, benefiting those with significant assets.
Additionally, the new tax law includes changes to the state and local tax (SALT) deduction cap, which increases to $40,000 for certain taxpayers before reverting to $10,000 in 2030. This higher SALT deduction primarily benefits high-income earners, including those in the top 0.1% of taxpayers. The combination of the increased lifetime exclusion amount on estates and the higher SALT deduction provides a significant tax advantage to wealthy individuals.
While the $15 million lifetime exclusion amount on estates may seem like a substantial figure, it is essential to consider its potential impact on tax revenues and wealth distribution. Critics of the new tax law argue that it disproportionately favours the wealthy, reducing tax revenues from high-net-worth individuals and exacerbating wealth inequality. However, supporters of the legislation may contend that it encourages investment and promotes economic growth, which could have positive spillover effects on the broader economy.
Black Rights Law: The First Published Landmark
You may want to see also
Explore related products
The standard deduction rises to $15,000 for single taxpayers
The standard deduction is a popular way for taxpayers to reduce their taxable income. The amount of the deduction depends on the taxpayer's age, filing status, and other factors. The standard deduction for single taxpayers without dependents increased to $15,000 for the 2025 tax year. This is an increase of $400 from the 2024 tax year, when the standard deduction for single taxpayers was $14,600.
For single taxpayers with dependents, the standard deduction for the 2025 tax year is $15,750, an increase from $15,000 in the previous year. For married taxpayers filing jointly, the standard deduction for the 2025 tax year is $30,000, an increase of $800 from the 2024 tax year. For heads of households, the standard deduction for the 2025 tax year is $22,500, an increase of $600 from the previous year.
It's important to note that these standard deductions are subject to change and may be adjusted annually to reflect inflation. Additionally, there may be other factors and qualifications that could impact the final deduction amount for taxpayers.
The changes in standard deductions are part of the One Big Beautiful Bill Act signed into law in July 2025. This legislation made permanent certain aspects of the 2017 Tax Cuts and Jobs Act (TCJA) that were initially set to expire at the end of 2025. While the standard deduction increases offer benefits to taxpayers, it's worth noting that the same legislation also includes tax breaks for the wealthy and cuts to essential programs that everyday families rely on.
The Founding Fathers and Constitutional Law
You may want to see also
Frequently asked questions
The "One Big Beautiful Bill Act" is a legislative package that establishes new tax laws that came into effect immediately after being passed in July 2025. The Act makes permanent aspects of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of 2025.
The new tax laws will benefit the rich after 2026 by providing tax breaks and lowering taxes for high-income earners. Specifically, the legislation increases the SALT deduction cap to $40,000 for certain taxpayers, raises the standard deduction to $15,750 for single filers and $31,500 for joint filers, and introduces a new deduction on auto loan interest for cars made in the US. Additionally, the legislation reinstates charitable deductions for non-itemizers and modifies the tax treatment of qualified small business stock.
The new tax laws will have a mixed impact on the rest of the population after 2026. While some individuals may benefit from the increased standard deduction and other tax breaks, others may face challenges due to cuts to essential programs and services, such as healthcare, food assistance, and public safety programs. Additionally, there will be a tax hike for parents paying for childcare, and the personal exemption deduction will be repealed.
