The ink isn't dry yet on President Donald Trump's tax bill, but the House proposal offers a template on potential tax-savings Americans can expect.
Here's a rundown of key House tax proposals — the Senate weighs in next — and how it could impact your bottom line. This analysis focuses solely on how the proposed bill will impact individual taxpayers. Keep in mind, however, that economists say the tax cuts will add to the nation's swelling trade deficit. And some could result in potential cuts to social programs to help pay for the reduction in U.S. tax revenue.
Extend Trump's Tax Bill 2017 Cuts
The House plan would permanently extend the 2017 Tax Cuts and Jobs Act (TCJA) which expires at year-end. An extension means the lower individual tax rates and the doubling of the standard deduction from TCJA will remain.
The House proposal also boosts the standard deduction by $1,000 for single filers and $2,000 for married couples from 2025 to 2028. In 2025, for example, single filers can deduct $16,000 — up from $15,000 last year — and joint filers can deduct $32,000, up from $30,000. That means a married couple earning $100,000 taking the standard deduction will see their taxable income shrink to $68,000. The standard deduction will also get an extra inflation adjustment, which will result in lower tax bills in subsequent years.
Seniors over the age of 65 will also get an additional $4,000 standard deduction between 2025 and 2028 on top of their regular standard deduction under the House plan.
The upside: Most U.S. taxpayers will avoid a sizable tax hike and benefit from larger posttax take-home pay.
"(The extension of TCJA) is big in that it avoids some fairly significant tax increases for most Americans," said Tim Steffen, director of advanced planning at Baird.
But since an extension of Trump's tax cuts means the tax code won't revert back to the higher tax brackets prior to TCJA, it won't necessarily feel like a huge tax cut, adds Steffen.
Temporary Boost To Child Tax Credit
Parents with kids under 17 would get more tax relief. The House tax plan would permanently extend the $2,000 per child credit from TCJA, which was scheduled to revert back to $1,000 after 2025. The House tax bill also adds in a sweetener. It provides an additional tax credit of $500 per child from 2025 to 2028, bringing the maximum credit to $2,500 per child.
And starting in 2029, the $2,000 tax credit will be adjusted for inflation. So, if inflation is up 2.5% per year over the next four years, the child tax credit will rise to $2,200 in 2029, according to the Bipartisan Policy Center, a Washington, D.C., think tank.
Small Business Owners Will See A Bigger Tax Deduction
Small business owners who pass through their business income to their personal tax return will see greater tax savings under the House legislation. The so-called QBI (qualified business income) deduction would rise to 23%, up from 20%.
This expanded deduction applies to one-person businesses, partnerships, S corporations and LLCs. "That's 3% more of income that's not taxed," said Steffen.
The QBI deduction is taken from adjusted gross income after your standard deduction or itemized deduction is applied. That means your tax bill is based on your income after applying the QBI deduction.
Here's a simple example: Let's say your wife earns $100,000 at her job and you earn $100,000 in your small business. That $200,000 income minus the standard deduction of $32,000 brings your adjusted gross income (AGI) to $168,000. You then can take the 23% deduction, or $23,000, on your $100,000 business income. That proposed larger deduction reduces your taxable income further to $145,000, or $3,000 less had the deduction remained at 20%.
High Net Worth Families Net Bigger Estate Tax Savings
The House tax bill also calls for permanently extending the higher tax exemption from Trump's 2017 tax act, which was also set to expire this year. For 2025, the estate tax exemption for single filers is $13.99 million and $27.98 million for married couples.
The exemption for single filers will rise to $15 million in 2026 and the threshold for married couples will rise to $30 million next year. The estate tax exemption will be adjusted for inflation thereafter.
The upshot is high net worth families can shield more of their income from Uncle Sam and pass on more money tax free to heirs and beneficiaries.
Just taking the estate exemption up next year by $1 million, could save a single filer roughly $400,000 in taxes alone. "That's a big number," said Steffen.
Property Owners In High Tax States Could See Relief From Trump's Tax Bill
In the proposed bill, homeowners can deduct a much higher amount for state and local taxes. The so-called SALT deduction would rise to $40,000, effective 2025, from the current $10,000 limit under TCJA.
"Depending on your filing status tax bracket, if you can pick up an extra $30,000 in deductions, you're talking about savings of $6,000 or $10,000 or so of extra tax savings," said Jeffrey Levine, professor of practice in tax planning at The American College of Financial Services.
The ability of homeowners in expensive and high tax states, such as New York, New Jersey and California, to deduct $30,000 more in property taxes and either income or sales taxes could enable them to hurdle the $32,000 standard deduction and perhaps take a higher itemized deduction. The number of Americans who itemize deductions on their federal tax returns fell sharply from roughly one-third of taxpayers to around 10% after the TCJA capped the SALT deduction at $10,000 back in 2017.
But the mortgage interest deduction on home loans will remain permanently at $750,000 of total home-related debt, below the $1 million deduction allowed prior to the TCJA in 2017. For example, a homeowner putting 20% down on a new home can buy a home valued at $937,500 to stay within the $750,000 interest deductible threshold.
"People with ultralarge mortgages are not going to be able to deduct interest over $750,000 in debt," said Steffen.
House Plan Adds A Deduction On Tips And Worker Overtime
As Trump touted during his campaign, the House bill would eliminate taxes on worker tips and overtime earnings. The tax savings for both tips and overtime pay will come in the form of a tax deduction after a tax filer's AGI is determined. And it would not require the worker to itemize deductions on their return to take advantage of the tax break.
"If the law passes as currently proposed, there will be a new group of deductions (similar to how the QBI small business deduction works)," said Levine.
Here's how it would work: Let's say a server makes $50,000 in regular pay and an additional $10,000 in tips. The restaurant worker would only be taxed on $50,000.
Similarly, let's say an hourly worker makes $20 per hour but $30 per hour in overtime pay. The deduction for overtime pay would apply only to the $10 per hour in extra compensation (not the full $30 earned in OT pay), according to the Bipartisan Policy Center.
What these deductions don't do, however, is lower the adjusted gross income (AGI) that the government uses to determine Social Security and Medicare payroll deductions, Levine notes.
There is an income cap, however. The deduction is not available for taxpayers making above $160,000 in 2025, or that level of income adjusted for inflation in the future.
HSAs Contribution Limits Could Double From Trump's Tax Bill
HSAs, which are already attractive due to their triple-tax benefits, are getting an added tax-savings boost. The contribution limits for these accounts, which are only available to workers with high-deductible health plans, are doubling.
Contributions for single taxpayers making under $75,000 are rising to $8,600 from $4,300. And married taxpayers earning less than $150,000 will see their contribution limit upped to $17,100 from $8,550.
"This is one potential tax change that hasn't gotten enough attention," said Steffen.
The reason: HSAs are the only type of savings account that allows you to put money in tax free, enjoy tax-deferred growth, and take tax-free withdrawals.
Workers who can max out both their HSAs ($17,100 for a family) and their 401(k) ($23,500 and $31,000 for savers over 50) can take a total deduction of anywhere from $40,600 to $48,100. Those are huge tax savings.
Qualifications to take advantage of HSAs have also been loosened. For example, Medicare Part A plan participants as well as individuals with bronze and catastrophic health plans from individual health exchanges can now contribute to HSAs.
There are other proposed HSA perks. Gym and fitness memberships would become eligible HSA expenses. The proposed plan would also allow more individuals to make flexible spending account (FSA) or health reimbursement arrangement (HRA) rollovers to HSAs, according to the Bipartisan Policy Center.
Car Buyers Could Save On Loan Interest
The House plan also creates a new deduction for interest paid on auto loans for cars assembled in the U.S. The no tax on auto loan interest is limited to $10,000 overall and phases out at a 20% rate for single taxpayers making above $100,000 and married filers earning more than $250,000. This deduction also does not require the taxpayer to itemize deductions.
This perk in the tax code could be the Republicans trying to offset the expected increase in the price of cars due to extra costs related to Trump's tariffs. "The deduction could mitigate some of the price increase," said Levine.
Young Kids Could Profit From New Savings Accounts
The House also added a new tax-advantaged account dubbed a "Trump account." The accounts, which are available only to children born during Trump's second term (Jan. 1, 2025 to Jan. 1, 2029) and are invested in diversified index funds, allow parents to contribute up to $5,000 per child.
The child beneficiary can't touch any funds from the accounts until they reach the age of 18. The funds must be used to fund higher education, start a business or purchase a principal residence. Any gains are subject to long-term capital gains tax rates.
To sweeten the deal, the House has proposed a pilot program in which the government would contribute $1,000 to Trump accounts for U.S. citizens born between 2025 and 2028.
In the House tax proposal, "there's a little bit of something for everyone," said Steffen.
Still, he cautions that the tax bill is not final. The Republican-led Congress is shooting for a final bill to be signed by the president by July 4.
"But that's a while from now," said Steffen. "So, don't make any tax-specific plans just yet. Don't go buy that car just yet." Wait until the tax law is finalized before making any financial moves.
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