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With the Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, the new Trump tax plan could change what you will pay in taxes. President Trump signed the TCJA into law in December 2017, with most changes affecting the 2018 tax year. Now, House Republicans have passed a major Trump-backed bill with a close 215-214 vote on May 22, 2025. The proposed legislation would make many TCJA provisions permanent, introduce new deductions and restructure parts of the tax code. The bill now moves to the Senate, where its future will be determined. Here’s how it could affect your taxable income, filing status and deductions.
Do you have questions about tax planning or financial planning in general? Speak with a financial advisor today.
Key Proposals for the New Trump Tax Plan
The current federal tax system includes many provisions that were originally enacted through the TCJA. It was signed into law in 2017, during President Trump’s first term. President Biden did not make direct changes to the TCJA, but he proposed adjustments aimed at rolling back parts of the law, especially provisions that benefit high earners and large businesses. The core of Trump’s TCJA provisions, however, have remained unchanged.
The TCJA permanently lowered corporate tax rates, but most individual tax cuts—like lower brackets, a bigger standard deduction and expanded credits—will end after 2025 unless Congress extends them.
Congress has started drafting a new tax plan, titled “The One Big Beautiful Bill Act,” which proposes making several provisions from the TCJA permanent. This includes maintaining lower individual tax rates, keeping the expanded standard deduction and preserving the qualified business income (QBI) deduction for pass-through entities. The plan also seeks to extend the child tax credit and offer seniors a tax break.
Another key proposal is the estate and gift tax exemption. Under the current law, the exemption amount is scheduled to drop by roughly half after 2025. The Trump plan would preserve the higher exemption threshold, allowing individuals to transfer more wealth tax-free through gifts or inheritances. This change would maintain the current structure of estate planning for high-net-worth households.
But, some proposals could also reduce existing tax benefits. The plan aims to roll back clean energy credits, limits deductions for state and local taxes, and removes certain education and health-related deductions. These changes are proposed to help offset the cost of extending tax cuts. For a deeper breakdown, we have divided the new Trump tax proposals into three buckets.
Permanent Extension of TCJA Provisions
The new Trump tax proposals aim to build on the framework of the TCJA by making several temporary provisions permanent. These include maintaining lower individual income tax rates, keeping the larger standard deduction and continuing the expanded child tax credit. The plan also preserves the 20% deduction for QBI and current exemption levels under the alternative minimum tax (AMT). Additionally, it proposes keeping the current estate and gift tax exemption in place, rather than allowing it to shrink after 2025.
| Category | Current Tax Law (2025 TCJA) | Proposed Trump Changes |
|---|---|---|
| Individual Tax Rates | Rates are set in seven brackets between 10% and 37%. They are scheduled to go up after 2025. | Makes 10% to 37% rates permanent. |
| Standard Deduction | Set at $15,000 for single tax filers and $30,000 for joint tax filers. It expires after 2025. | Makes the deduction permanent. Adds $1,000 for single and separate filers, $2,000 for joint filers, and $1,500 for heads of household through 2028. |
| Child Tax Credit | $2,000 per child, with $1,700 refundable in 2025. | CTC increases to $2,500 between 2025 and 2028, then goes back to $2,000 in 2029. The refundable part would go up with inflation as well. |
| Qualified Business Income (QBI) Deduction | Business owners can deduct up to 20% of QBI for sole proprietors, partnerships, or S corporations. Expires in 2025. | Makes the 20% deduction permanent for sole proprietors, partnerships and S corporations. |
| Alternative Minimum Tax (AMT) | Exempts $88,100 for individual filers ($68,500 for married filing single) and $137,000 for joint filers. Reverts to pre-TCJA levels after 2025, adjusted for inflation. | Keeps current exemption levels permanent. |
| Estate and Gift Tax | Exempts $13.99 million per person and drops to $7 million after 2025. | Raises the estate exemption to $15 million starting in 2026 and indexes it for inflation after that. |
Who Are the Winners and Losers?
Trump’s new tax plan focuses on maintaining broad tax relief while providing specific gains to business owners and high-net-worth households. Specifically, these changes could benefit some working families, and small business owners, as well as wealthy individuals with significant estates or investment income. But, taxpayers who do not qualify for these deductions or credits—such as those without dependents, not running a business, or not subject to the estate tax—may see fewer advantages.
New Tax Relief Measures
The new Trump tax plan introduces several relief measures aimed at reducing taxable income for some workers. Under the current law, income from tips and overtime is fully taxable. The proposed legislation would exempt qualified tips from federal income tax and make overtime fully deductible after 2025.
Retirees also hoped to get an exemption for Social Security benefits, as they get their benefits taxed once income crosses a certain threshold. But, the new Trump tax plan only offers them a tax break.
Finally, the plan allows taxpayers to deduct interest paid on auto loans, which is a deduction that is not currently available.
| Category | Current Tax Law (2025 TCJA) | Proposed Trump Changes |
|---|---|---|
| Taxation of Tips | Fully taxed as regular income. | Exempts qualified tips from federal income tax. |
| Taxation of Overtime Pay | Fully taxed as regular income. | Qualified overtime is fully deductible beginning in tax year 2025 and ending in 2028. |
| Auto Loan Interest | Not deductible. | Deduction up to $10,000 in auto loan interest. Phases out at MAGI of $100,000 for individuals and $200,000. |
| Senior Deduction | Provides extra $2,000 (single) or $1,600 (per spouse) if 65+ or blind. Doubled if both. | Increases the deduction to $4,000 for seniors 65 and older, phasing out with a MAGI above $75,000 for individuals and $150,000 for couples. |
Who Are the Winners and Losers?
These new tax relief measures could help ease tax burdens for certain service workers and hourly employees who would be exempt from paying taxes on tips and overtime, as well as seniors and car buyers. However, the new plan does not offer relief to taxpayers who fall out of these targeted categories.
Revenue Offsets, Spending Cuts and Additional Provisions
The new Trump tax plan includes provisions to reduce federal spending and offset the cost of extending and expanding tax cuts. It repeals or phases out a range of clean energy tax credits, including those for electric vehicles and solar installations, which were introduced through President Biden’s Inflation Reduction Act. The plan also tightens rules for Medicaid and SNAP by adding federal work or community engagement requirements, expands SNAP work rules to older adults and shifts more administrative costs to the states. These changes are designed to reduce federal obligations.
At the same time, the proposed legislation eliminates federal funding for Planned Parenthood, cutting off support for reproductive health services currently covered under Title X and Medicaid. In contrast, it also introduces a new initiative—Trump savings accounts—that would provide each newborn with a $1,000 tax-deferred account to be used for education, housing, or retirement.
| Category | Current Tax Law (2025 TCJA) | Proposed Trump Changes |
|---|---|---|
| Clean Energy Credits | Provides up to $7,500 in EV credit and 30% for solar, clean energy. | Repeals or phases out most IRA-era energy credits. |
| Medicaid Rules | Varies by state. No federal work rules. | Adds work/community engagement requirement and more frequent eligibility checks. |
| SNAP Work Rules | Provides food assistance for low-income individuals. Work rules apply to ages 18–49 and waivers are common. | Expands work rules to age 64, restricts waivers, and reduces federal admin cost-share to 25%. |
| Planned Parenthood Funding | Eligible services, including birth control, STI testing, cancer screenings and gynecological services are covered under Title X and Medicaid funds. | Eliminates all federal funding. |
| Trump Savings Accounts | No federal birth savings program. | $1,000 tax-deferred account at birth, usable for education, housing, or retirement. |
Who Are the Winners and Losers?
These changes show a shift in priorities, giving new savings benefits to families with newborns, while cutting funding for some public health and social programs. Low-income households that use Medicaid, SNAP, or Planned Parenthood services could be most affected if they lose support. Businesses and individuals using clean energy tax credits would also lose out.
How Do Financial Experts Evaluate the New Trump Tax Plan?
Most of the proposed tax cuts are expected to benefit higher-income households. The Congressional Budget Office estimates that the plan would increase the federal deficit by $3.8 trillion in 10 years, which contributed to a recent U.S. credit rating downgrade by Moody’s.
The Penn Wharton Budget Model, by comparison, says that this bill would increase the deficit by $4.3 trillion in 10 years. The estimate also forecasts the GDP to go up by 0.4% during same time span (and 0.7% in 30 years).
And, the Institute on Taxation and Economic Policy (ITEP) projects that the poorest 20% of Americans would get just 1% of the total tax cuts in 2026, while the richest 20% would get 68%. The top 5% alone would receive 44% of the cuts.
Brief History of the Current Trump Tax Law (TCJA 2018-2025)
In 2017, House Republicans and President Trump worked to introduce a tax bill that would simplify the tax system. The TCJA was unveiled on Nov. 2, 2017, calling for sweeping changes to the current tax law.
The House passed the final version of the bill on Dec. 20, 2017, with a final tally of 224-201. Twelve House GOP members and all Democrats opposed the legislation. Originally, the House passed the bill on Dec. 19, but another vote was necessary because several provisions of the bill reportedly violated Senate rules and needed to be removed. The Senate passed the corrected version of the bill in the early morning hours of Dec. 20, voting 51-48 along party lines. President Trump then signed the bill into law on Dec. 22, 2017.
Most of the tax changes in the TCJA went into effect in January 2018, for the 2018 tax year. That means the changes didn’t affect many 2017 tax returns (you filed 2017 taxes in early 2018). Employees didn’t see changes in their paycheck withholding until February 2018.
Trump Tax Law Brackets: Seven in Total
Trump’s 2017 tax plan originally called for cutting the number of tax brackets in the federal income tax system from seven to four, but the final version of the bill maintains the seven brackets. It did, however, change their rates.
Previously, the tax brackets went up to a top rate of 39.6%. The new tax brackets, which applied as of January 2018, have rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. These are the rates that determine your tax bill and still apply in 2025.
The table below breaks down the brackets for single and joint filers. If you use have a different filing status, make sure to read our full breakdown of the current tax brackets:
2025 Federal Income Tax Brackets
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 | $0 – $11,925 | $0 – $17,000 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 | $11,925 – $48,475 | $17,000 – $64,850 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 | $48,475 – $103,350 | $64,850 – $103,350 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 | $103,350 – $197,300 | $103,350 – $197,300 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 | $197,300 – $250,525 | $197,300 – $250,525 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 | $250,525 – $626,350 | $250,525 – $626,350 |
| 37% | $626,350+ | $751,600+ | $578,125+ | $626,350+ |
You should note that the new Trump bill would amend the tax code to extend TCJA brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) beyond their scheduled expiration in 2025 and includes provisions to adjust the thresholds for inflation. This means that the existing brackets will continue in 2026, adjusted for inflation, rather than reverting to pre-TCJA rates. The exact dollar thresholds for each tax rate in 2026 are not specified in the bill itself, as they will be calculated based on inflation indexing formulas defined in the Internal Revenue Code.
If you want to know how much your next tax refund or balance could be, SmartAsset’s tax return calculator can help you get an estimate.
Trump Tax Plan Changes: Standard Deduction
The 2017 Trump tax law (TCJA) nearly doubled the standard deduction for all filers. If you’re a single filer or if you’re married filing separately, your standard deduction for 2025 is $15,000. Joint filers have a deduction of $30,000 and heads of household get $22,5000.
For reference, the standard deduction before the TCJA was $6,350 for individuals in tax year 2017, $12,700 for those married filing jointly and $9,350 for heads of household.
The new Trump tax plan in 2025 would raise the standard deduction from 2025 to 2028, adding a fixed amount based on filing status—$1,000 for single and separate filers, $2,000 for joint filers, and $1,500 for heads of household. These adjustments would lower taxable income for a limited time before ending after 2028. Here’s a table comparing the 2025 standard deduction with the new Trump proposal.
Standard Deduction: Current Tax Law (TCJA) vs. New Trump Tax Plan
| Filing Status | Current 2025 Standard Deduction | Proposed Trump Standard Deduction |
|---|---|---|
| Single Filers | $15,000 | $16,000 |
| Married Filing Jointly | $30,000 | $32,000 |
| Head of Household | $22,500 | $24,000 |
| Married Filing Separately | $15,000 | $16,000 |
Trump Tax Plan Changes: State and Local Tax Deductions (SALT)
Initially, Republicans wanted to eliminate almost all itemized deductions, including state and local tax (SALT) deductions, and keep those for charitable deductions and mortgage interest. Ultimately, the 2017 Trump tax law (TCJA) capped SALT deductions to $10,000 ($5,000 for married taxpayers filing separately).
Before the TCJA was passed, taxpayers who itemized could deduct their state and local income, property and general sales tax payments on their federal tax returns. This was especially useful for residents of high-tax states like California and New Jersey.
The new Trump tax plan in 2025 would change the SALT deduction by increasing the cap from the current $10,000 limit to $40,000 for most filers and $20,000 for married individuals filing separately. The cap begins to phase down at a modified adjusted gross income (MAGI) of $500,000 for individuals and $250,000 for separate filers. The deduction cannot fall below $10,000 ($5,000 for separate filers). There is also a temporary increase in effect only for tax year 2025.
The initial version of the 2025 tax plan increased the cap from the current $10,000 limit to $30,000 for most filers ($15,000 for married individuals filing separately). This cap would have phased down at a MAGI over $400,000 ($200,000 if married filing separately).
SALT Deduction Comparison Table
| Feature | Before the 2017 Trump Tax Law (TCJA) | Current Tax Law (2025 TCJA) | New Trump Plan (with Amendments) |
|---|---|---|---|
| SALT Deduction Cap | No cap | $10,000 ($5,000 if married filing separately) | $40,000 ($20,000 if married filing separately); temporary increase for 2025 |
| Income-Based Phaseout | None | None | Phases down 30% of excess MAGI over $500,000 ($250,000 if married filing separately) |
| Minimum Deduction Allowed | Not applicable | Fixed cap ($10,000 / $5,000) | Cannot fall below $10,000 / $5,000 even after phase-down |
As you can see from the table, these higher deduction limits begin to phase down for individuals with MAGI over $500,000 (or $250,000 if filing separately), reducing the allowable deduction by 30% of the excess income. However, even with this reduction, the deduction cannot drop below $10,000 ($5,000 for married filing separately).
This means that if you are a taxpayer who itemizes deductions, you could benefit from a higher SALT cap under the proposal. But, high earners may see reduced benefits or no change depending on their income level.
Trump Tax Plan Changes: Mortgage Interest Deduction
Before the 2017 Trump tax law (TCJA), homeowners who itemized their deductions could deduct their mortgage interest payments on mortgages up to $1 million. But, after the TCJA was passed, that deduction was capped at $750,000 for mortgages taken out after December 15, 2017. If you’re married and filing separately, your limit is $375,000 in mortgage interest.
The new Trump tax plan in 2025 would make the TCJA’s mortgage interest deduction limits permanent. It maintains the $750,000 cap and $375,000 limit for separate filers, thereby preventing the deduction thresholds from returning to pre-TCJA levels after 2025.
Trump Tax Plan Changes: Child Tax Credit
Under the 2017 Trump tax law (TCJA), the Child Tax Credit (CTC) increased to $2,000 per child under 17. The credit was $1,000 before the TCJA became law. For tax year 2025, the first $1,700 of the credit is refundable. These changes expire in 2025.
With the new Trump plan in 2025, the CTC would go up to $2,500 per qualifying child through 2028. Beginning in 2029, the credit would return to $2,000, with annual inflation adjustments applied after that.
The refundable part of the credit, now limited to $1,400, would also increase based on inflation. To claim the credit, the child, the filer and the spouse (if married) would all need valid Social Security numbers.
Trump Tax Plan Changes: Estate and Gift Tax Exemptions
The federal estate tax, which ranges from 18% to 40%, applies when people with large estate transfer property to heirs. The 2017 Trump tax law (TCJA) doubled the lifetime estate and gift tax exemption from $5.49 million for individuals in tax year 2017 to $11.18 million in tax year 2018. This higher limit, which allows wealthy families to transfer more money tax-free to their heirs, has increased each year since.
The estate and gift tax exemption for 2025 is $13.99 million, but it’s set to drop after that under current law. The new Trump tax plan would raise the exemption to $15 million per person starting in 2026 and make the increase permanent by updating inflation rules and removing the expiration language.
To recap, the table below compares the estate tax exemption based on pre-TCJA, TCJA and the new Trump tax proposal:
| Category | Before the 2017 Trump Tax Law (TCJA) | Current Tax Law (2025 TCJA) | New Trump Tax Proposal |
|---|---|---|---|
| Exemption Amount | $5.49 million (2017) | $11.18 million (2018) – $13.99 million (2025) | $15 million per person starting in 2026 |
| Adjustment for Inflation | Yes | Yes | Yes, using 2025 as the new base year |
| Expiration/Sunset | Not applicable | Expires after 2025 | Permanent; removes expiration language |
Trump Tax Plan Changes: Lower Corporate Tax Rate
Before the 2017 Trump tax law (TCJA), the corporate tax rate was 35%. The TCJA reduced the rate to 21%. This flat rate applies to all corporate income (of at least $1). The intent was to give corporations a financial break that would be passed on to the employees, and subsequently the economy.
With the new Trump plan in 2025, the 21% corporate tax rate from the TCJA remains unchanged. However, the legislation introduces modifications to international tax provisions, including increased enforcement against foreign countries with discriminatory tax practices. It would raise certain withholding tax rates on payments to entities from these countries and adjust how multinational corporations are taxed on base erosion payments by increasing the base erosion and anti-abuse tax (BEAT) rate from 10% to 10.1% (the initial version of the proposal called for an increase to 12.5%).
Trump Tax Plan Changes: Healthcare Mandate
Another impact of the 2017 Trump tax law (TCJA) was the elimination of the mandate for every adult to have health insurance. This was a key provision that was part of the American Care Act. The thought by many is that this could increase the premiums on insurance and drive taxes up for lower-income individuals down the road.
Under the new Trump plan in 2025, individuals who receive advance premium tax credits must file a tax return and reconcile those credits each year to remain eligible for future subsidies. Starting with plan years after January 1, 2026, if a person fails to file their tax return or reconcile advance payments from a prior year, they will not qualify for a premium subsidy in the following year. This limits eligibility to individuals who are current with their tax filing obligations.
What Happens If the 2017 Trump Tax Law Expires?
Many parts of the Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025, which could lead to higher taxes for individuals and businesses unless Congress makes changes. If the law is not extended, tax rates, deductions and exemptions could return to pre-2018 levels, affecting many taxpayers.
One major change might be higher income tax rates for many filers if brackets revert to previous levels, with a top rate of 39.6%. The standard deduction, which was nearly doubled under the TCJA, could also shrink by $8,300 if it reverts back to pre-2018 levels, meaning that more people may need to itemize deductions. Additionally, the estate tax exemption could get reduced, making it more expensive to pass wealth to heirs.
The cap on state and local tax (SALT) deductions, which has limited how much taxpayers in high-tax states can deduct, is also set to expire. This could provide relief to some taxpayers. The child tax credit, which doubled under the TCJA, may decrease as well, reducing the tax benefits for families.
For businesses, the corporate tax rate is expected to stay at 21%. But some tax breaks, such as bonus depreciation, could phase out. This would impact how businesses invest and manage expenses.
Since these changes could affect financial planning, working with a tax professional or financial advisor could help individuals and businesses prepare for potential tax increases after 2025.
Timeline: Key Trump Tax Plan Events
- Feb. 21, 2025: The Senate passes a budget resolution to begin reconciliation but does not authorize new tax cuts.
- Feb. 25, 2025: The House passes its own resolution allowing up to $4.5 trillion in tax cuts over 10 years, offset by $2 trillion in spending reductions.
- Apr. 2, 2025: The Senate releases a revised budget plan permitting $1.5 trillion in tax cuts and a debt ceiling increase of $5 trillion, adopting the House’s proposed tax assumptions.
- Apr. 10, 2025: The House approves the Senate’s amended budget, enabling up to $5.3 trillion in tax cuts and a $5 trillion debt limit increase.
- May 22, 2025: The House passes the revised “One Big Beautiful” tax bill, which includes a higher SALT cap, changes to inflation indexing and energy credits.
Bottom Line
The U.S. tax code can shift significantly with new legislation. The TCJA introduced major changes to tax brackets and deductions, many of which are set to expire after 2025. The new Trump tax proposals aim to extend or make permanent several of these provisions, including lower individual rates, expanded standard deductions and limits on certain itemized deductions, which would otherwise sunset under the current law.
Tips for Filing Your Taxes
- If you need help keeping up with all the tax changes, a financial advisor can work with you to prepare your finances. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When the tax code changes, it’s a good idea to use a good tax filing service. We did our annual roundup of the best tax filing software so that you can get through this tax season as painlessly as possible.
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