Trump Tax Brackets: Will Your Tax Rate Change Under the New Plan?

Republicans in the House of Representatives have settled their internal disputes and passed President Donald Trump’s sweeping tax plan, which would permanently extend the federal income tax brackets created during his first term and add new tax cuts. While the legislation also introduces new tax breaks, such as exempting tips and overtime pay from federal income taxes, it’s expected to add trillions of dollars to the federal deficit.

Do you have questions about how these changes could affect your taxes? Speak with a financial advisor today.

How Does Trump’s Tax Plan Affect Your Tax Bracket?

If approved by Senate and signed into law, Trump’s tax plan—titled “The One Big Beautiful Bill Act”—would make the current marginal tax rates permanent. Created through the Tax Cuts and Jobs Act (TCJA) of 2017, the current tax brackets are set to expire at the end of 2025. 

If the Senate doesn’t pass Trump’s bill or an alternative, the current tax brackets would sunset and the previous rates would return, including a top marginal rate of 39.6%.

What Are the Current U.S. Tax Brackets?

There are currently seven marginal tax rates in place, ranging from 10% to 37%. Marginal tax rates apply only to the portion of your income that falls within each tax bracket, not to your total income. To determine your marginal tax rate, find the highest tax bracket that includes part of your taxable income.

Here’s a breakdown of the brackets in 2025:

2025 Federal Income Tax Brackets

The dollar ranges for each federal income tax bracket are adjusted annually for inflation. The IRS updates these thresholds each year based on changes in the Chained Consumer Price Index, so the income ranges typically increase slightly to reflect cost-of-living adjustments. 

For example, someone who earned $102,000 in 2024 would have been in the 24% tax bracket. However, thanks to the annual inflation adjustment, the same $102,000 salary in 2025 puts them in the 22% tax bracket, which tops out at $103,350 for single filers. 

What Happens if the Current Tax Brackets Expire?

If Republicans cannot fully pass Trump’s tax plan beyond the House, the current tax brackets would expire and revert to their pre-2018 levels when the marginal tax rates were: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. 

Keep in mind that the income ranges for each tax bracket wouldn’t revert to 2017 levels—only the rates. To illustrate how the tax brackets could potentially change if the TCJA sunsets, the Tax Foundation estimated the income ranges for each marginal rate in 2026 (adjusted for inflation).

If the TCJA provisions expire, many taxpayers could face higher marginal tax rates.

For instance, a single filer earning $50,000 in taxable income in 2025 would fall into the 22% marginal tax bracket. However, under the pre-TCJA rates projected for 2026, that same income would place them in the 25% bracket. Similarly, a married couple filing jointly with $120,000 in taxable income would move from the 22% bracket to the 25% bracket if the TCJA expires.

What Else Does the Trump Tax Plan Do?

Beyond adjusting income tax brackets, Trump’s plan introduces several provisions aimed at modifying deductions and credits. Here’s an overview of key components:

Increased SALT Deduction

The bill also proposes raising the state and local tax (SALT) deduction cap from $10,000 to $30,000 for all taxpayers (other than those who are married filing jointly). This increased cap would phase out for households earning more than $400,000 per year. 

Facing resistance from moderate Republicans in high-tax states pushing for a larger SALT deduction, House Speaker Mike Johnson has tentatively agreed to a higher cap. The proposed increase would elevate the deduction limit from $10,000 (under current law) to $40,000 annually for households earning up to $500,000. The cap, which would grow by 1% annually over a 10-year period, would begin to phase out for incomes exceeding $500,000.

Raising the Standard Deduction

The bill extends the enhanced standard deduction introduced by the TCJA and adds a temporary increase for tax years 2025 through 2028. During this period, the standard deduction would rise by $2,000 for married couples filing jointly and by $1,000 for single filers and married individuals filing separately. For heads of household, the increase would be $1,500. These adjustments aim to reduce taxable income for most households and will revert to baseline levels starting in 2029.

No Tax on Tips and Overtime

The bill allows taxpayers to deduct both tips and overtime pay from federal taxable income. Tips must be cash-based, voluntarily paid and earned in occupations where tipping was customary before 2025. The deduction excludes tips received in specified service trades or by high-income earners. For overtime, the deduction applies to pay above the regular rate as defined by the Fair Labor Standards Act. Highly compensated employees are excluded. Both deductions would be available to non-itemizers and require valid Social Security numbers.

Child Tax Credit

Republicans are also proposing to increase the Child Tax Credit to $2,500 per qualifying child for tax years 2025 through 2028, after which it reverts to $2,000 and is indexed for inflation. To claim the credit, taxpayers must include valid Social Security numbers for themselves, their child and (if married) their spouse. 

Enhanced Deduction for Seniors

The Trump tax plan also introduces a “bonus additional amount” that increases the standard deduction for seniors by $4,000 from 2025 through 2028. This enhanced deduction phases out for individuals with modified adjusted gross income (MAGI) above $75,000 ($150,000 for joint filers), reduced by 4% of the excess income. The additional deduction is available to both itemizers and non-itemizers, ensuring seniors benefit regardless of how they file. A valid Social Security number is required to claim the deduction

Impact of Trump Tax Plan 

While the Trump administration projects significant economic growth, many economists and fiscal analysts are expressing concerns about its long-term fiscal implications.

Nonpartisan estimates suggest the bill will add trillions to the national debt over the next decade. For example, the nonpartisan Congressional Budget Office (CBO) projects the plan will add $3.8 trillion to the country’s deficit between 2025 and 2034. Surging debt has already contributed to a downgrade of the U.S. credit rating by Moody’s, reflecting concerns over fiscal sustainability.

Meanwhile, the nonpartisan Penn Wharton Budget Model estimates the plan will add $4.8 trillion to the deficit in the next 10 years.

Who Benefits the Most?

The benefits of the tax cuts are expected to be unevenly distributed. High-income earners and corporations are likely to see the most significant gains, while middle-income workers may experience modest relief. 

The Institute on Taxation and Economic Policy (ITEP)—a left-leaning economic think tank—estimates that 68% of the tax cuts offered under the plan in 2027 will go to the top 20% of households. While the top 1% of families will receive 20% of the tax cuts, just 14% of the cuts will benefit families earning $75,000 or less, according to the ITEP analysis.

The Penn Wharton Budget Model analysis offered similar conclusions. “On a conventional basis, households in the first income quintile lose about $940 in 2026, reflecting net reductions in taxes and transfers, including cuts to Medicaid and SNAP. The top 10% of the income distribution receives about 65 percent of the total value of the legislation.”

Social Program Cuts

To offset some of the tax cuts, the bill proposes significant reductions in social safety net programs. According to the CBO, Medicaid would face nearly $700 billion in cuts, potentially leading to over 10 million people losing coverage. The Supplemental Nutrition Assistance Program (SNAP) would see $267 billion in cuts, with added work requirements that could affect millions.

Effect on GDP

The White House projects that the bill will boost gross domestic product (GDP) by up to 5.2% in the short term and increase wages significantly. However, independent analysts are skeptical, estimating a more modest GDP increase and warning that the long-term economic benefits may not materialize as projected. 

Will the Trump Tax Brackets Pass?

Trump and Johnson overcame a significant hurdle in uniting House Republicans around the bill, which passed by a margin of 215-214. Only two Republican representatives voted against the legislation, with another voting “present.” However, the future of the bill as presently constituted remains uncertain. It will likely face unanimous opposition from Democrats in the Senate, as well as potential changes that Senate Republicans want.

Among Republicans, fiscal conservatives have expressed concerns about the bill’s projected addition of nearly $4 trillion to the national debt. They have demanded deeper and more immediate spending cuts, particularly to programs like Medicaid and green energy subsidies. 

When asked by CNN how many Republican senators share his concerns about the bill’s impact on the national debt and are willing to make significant changes to it, Sen. Ron Johnson (R-Wisconsin) said: “I think we have enough to stop the process until the president gets serious about spending reduction and reducing the deficit.”

Meanwhile, other Republicans have expressed apprehension about the bill’s cuts to Medicaid. “I am looking very carefully at the Medicaid provision, and in particular, I’ve been very concerned about the impact on children, on people with disabilities, on seniors who are eligible for both Medicare and Medicaid, and for low-income families,” Sen. Susan Collins (R-Maine) told WMTW in Maine. “The House bill tries to thread the needle. I’m not certain that they succeeded, but I’m still looking at the specifics.”

“Republicans need to open their eyes: Our voters support social insurance programs. More than that, our voters depend on those programs,” Sen. Josh Hawley (R-Missouri) wrote in a May 12 op-ed in the New York Times.

Democrats unanimously oppose the bill, criticizing it for favoring the wealthy while proposing cuts to social safety net programs. They argue that the bill’s tax cuts disproportionately benefit high-income earners and corporations, while reductions in Medicaid and SNAP would harm vulnerable populations.

Bottom Line

With the expiration of current tax provisions approaching, Congressional Republicans are working to pass Trump’s tax plan, which would make his 2017 tax cuts permanent. Whether the proposed changes move forward or stall, adjustments to deductions, credits and brackets could reshape how income is taxed across different households.

Tax Season Tips

• You may be able to take advantage of tax minimization strategies by working with a financial advisor who offers tax planning. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• See if you’ll be getting a refund or if you’re likely to have to send a check to the government by using SmartAsset’s tax return calculator. This can be useful for your household budget.  Plus, it helps you know what to expect when you go through with actually filing.

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