How Trump’s big bill could affect your taxes

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 How Trump’s big bill could affect your taxes
by Tobias Burns - 05/21/25 5:34 PM ET

President Trump’s bill to cut taxes and spending centers on an extension of his previous round of tax cuts, which Republicans slated for expiration at the end of this year back in 2017.

As such, it will preserve the status quo on many big parts of the code so that taxpayers won’t see any change in things like the amount of money the government takes out of their paychecks.

Other tax cuts in the legislation now moving through Congress will be brand new, though most of the new additions are scheduled to end after a few years.

Here’s a look at some of the big-ticket items in the latest round of GOP tax cuts.


Personal income tax rates will stay the same

Trump’s 2017 tax law cut many individual income tax rates, and those would continue into the future through the current legislation.

Under current law and moving up the income spectrum, marginal rates are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The new GOP law will lock those rates in place.

The extension of those rates will reduce federal revenues by $2.2 trillion through 2034, according to the Joint Committee on Taxation (JCT).

If they were allowed to lapse, rates would change to 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent. Only the 10-percent and 35-percent rates were left alone by the 2017 tax cuts.

Trump in recent weeks floated letting the top rate go back to 39.6 percent from 37 percent as a way to lower the $3.8 trillion cost of the bill’s tax portion, but he has since backed away from that idea.


The higher standard deduction and cancellation of personal exemptions will remain

The law preserves — and temporarily boosts — the higher standard deduction, which was nearly doubled back in 2017. The new boost is $1,000 for individuals and $2,000 for couples filing jointly and will last for four years.

This is paired with getting rid of personal exemptions, making tax filing simpler for many taxpayers.

In 2024, the standard deduction was $14,600 for individuals and $29,200 for married couples.

The higher standard deduction is projected to reduce revenues by $1.3 trillion through 2034. The loss of personal exemptions will add $1.9 trillion to federal revenues, resulting in a net revenue gain between the two measures.


No taxes on tips or overtime pay

The bill creates a temporary full deduction for tips and overtime pay, allowing taxpayers to avoid paying taxes on those types of compensation. Taken together, the tax breaks will reduce revenues by about $164 billion through 2028 when they expire.

People who work in the restaurant industry say they’re concerned that the tax break will motivate customers to pay fewer gratuities, since tipping is left to the discretion of individual shoppers and diners as opposed to being a component of the employer-paid wage.

“I’m afraid that people are going to want to tip less with that income not being taxed,” one New York City bartender, who asked not to be named, told The Hill.

The person also expressed concern that the no-tips rule could add to tensions in his restaurant between the front-of-house staff, who work for tips, and the kitchen staff, who do not.

“In the industry, the bigger concern is, why would the front-of-house not pay taxes when the back-of-house will still be paying taxes because they don’t get tips?” the person said.

Tax experts told The Hill the measures could add to the amount of paperwork that tax filers — both employers and employees — need to fill out, depending on how the IRS interprets the law and modifies its regulations and forms.


An additional tax break for seniors

The law gives an additional $4,000 tax break to seniors below a certain income threshold, which would be added to the $15,000 standard deduction and an already existing $2,000 deduction for seniors.

Trump promised while campaigning to remove taxes on Social Security, which is funded through a payroll tax and then taxed again, above an income threshold, upon disbursal to bolster the Social Security fund along with Medicare.

The enhanced deduction for seniors is a close substitute for the Social Security tax cancellation promised by Trump but is technically a different tax. According to congressional rules, the Social Social program cannot be altered through budget reconciliation, which is the legislative workaround Republicans are using to allow a party-line vote on their bill and avoid a Democratic filibuster in the Senate.


The grand finale of the SALT cap

Republicans haven’t agreed on the most controversial provision of their tax bill — the state and local tax (SALT) deduction cap — but they’re getting close. The initial proposal from the Ways and Means Committee raised the cap to $30,000, but members of the SALT caucus shot it down.

Another proposal floated late Tuesday would bump the SALT deduction cap up to $40,000 — four times the current $10,000 cap — for people making $500,000 or less in income, three sources told The Hill. That level would increase by 1 percent a year over 10 years, according to one of the sources.

Whatever they agree to, it will be expensive. Various estimates from the JCT put the cost of canceling the cap — which is a top priority for many blue-state Republicans — at around $1 trillion over 10 years.

The SALT cap interacts with different parts of the tax code, including the higher standard deduction and the extended effective repeal of the alternative minimum tax (AMT), which costs more than $1.4 trillion in revenues.

“Even if you live in a place like New York, the combination of repealing the AMT and the $10,000 SALT cap was actually still positive for you. You were better off with the SALT cap because you lost the AMT than you would have been if the law hadn’t happened at all,” Tax Policy Center senior fellow Howard Gleckman told The Hill.

“It was actually a good deal for people,” Gleckman said.

https://thehill.com/business/5312453-trump-tax-cuts-impact-on-taxpayers/