Donald Trump has returned to the White House for a second term. During his first, Trump overhauled the tax code with his 2017 Tax Cuts and Jobs Act (TCJA). Many of those provisions are set to expire at the end of 2025.
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If Trump extends his tax policy, however, how could it impact American’s wallets? Here’s what tax experts have to say.
How the Tax Cuts and Jobs Act Impacted Individual Taxpayers
From an individual taxpayer’s perspective, Michael Kramarz, tax principal at Kaufman Rossin, an independent CPA and advisory firm in Florida, said there was a change in the individual tax rate and between the itemization and standard deduction. The TCJA also doubled the maximum child tax credit.
“The standard deduction was increased to a level that made it such that many Americans were opting to utilize the standard deduction as opposed to itemizing,” Kramarz explained. “So the combination of those two helped to bring down the effective tax rates for individuals across the income spectrum.”
In 2024, the standard deduction is $14,600 for single filers and married persons filing separately. The amount increases to $15,000 in 2025. Back in 2017, the TCJA increased the standard deduction from $6,500 to $12,000 for individual filers, according to the Tax Policy Center.
Asher Rubinstein, partner at Gallet Dreyer & Berkey in New York City, added that the TCJA also increased the exemption from the federal estate tax to $14 million, and limited the SALT deduction — which allowed taxpayers paying state income taxes to deduct the full amount of state income taxes from his or her federal income tax return before TCJA — to $10,000.
“This was particularly harmful to taxpayers in states with high state income taxes, like New York, New Jersey and California,” Rubinstein wrote in an email.
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What Happens if the TCJA Expires?
If the TCJA expires without an extension, then the brackets and rates would go back to how they were prior to the enactment of the TCJA. According to estimates from The Tax Foundation, if the TCJA expires as scheduled, it could result in more than 62% of taxpayers experiencing tax increases in 2026.
“You’re going to have individuals now having to re-examine whether or not they’re going to claim the itemized deduction or the standard deduction, whereas most individuals today are just claiming the standard deduction because it’s such a large amount,” Kramarz said.
The federal estate tax exemption will also be reduced to $7 million. “So, in rough terms, the current exemption will be cut in half,” Rubinstein wrote. “Estates with a value less than $7 million will not be subject to federal estate tax, and the estate tax will hit estates valued greater than $7 million.”
How Much Could Americans Save?
There’s no set amount that Americans could potentially save if President Trump reinstates the TCJA, and Rubinstein also pointed out that not all Americans will save money in taxes.
According to Kramarz, how much taxpayers can possibly save depends on the individual’s overall income and particular expenses.
“You could have one individual who now is going to take advantage of itemized deductions, whereas another individual is not because we just don’t have those expenses,” he said. “And so the second individual is going to be stuck taking the standard deduction, which is a much lower amount than it currently is.”
In other words, individual A, who is able to itemize, is going to be at a lower effective tax rate because they’re now able to take advantage of more deductions versus individual B.
“Most clients do an analysis of whether or not to claim the standard deduction or itemize, but I think that’s going to be a much more relevant inquiry now that the standard deduction is going back to the pre-TCJA amount,” Kramarz added.
There are also talks of the removal or adjustment of the SALT limitation. “This will benefit taxpayers in high-tax states. However, at the current time, it is difficult to quantify the benefit,” Rubinstein explained.
Planning Ahead
While Kramarz believes the TCJA will be extended under Trump, he still recommends planning for a potential expiration.
“Normally in tax planning, you want to defer income and accelerate expenses, but if you know your tax rate is going to increase, then you would actually want to accelerate income into the current year, 2025, and push your deductions into a later year when those deductions are going to be worth more to you,” Kramarz explained.
“So there’s some planning that could be done, but like I said, I do think the provisions get extended, and so I think most individuals are just going to be kind of status quo moving into next year,” he added.
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This article originally appeared on GOBankingRates.com: If Trump Reinstates Tax Cuts, Here’s How Much You Could Save
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