It’s been about two weeks since the president’s new legislation, often referred to as the “Big Beautiful Building,” was signed into law. Financial advisors and tax professionals are still working to understand what this sweeping law means for their clients.
Some changes are set to take effect in 2025, impacting tax returns that will be submitted in 2026.
The Trump administration is advocating for “tax cuts for working families,” but experts remind us that the effects of the legislation can vary based on individual circumstances. Some aspects of it are quite complex.
“There are so many moving pieces,” said Jim Guarino, a managing director at Baker New Mannoes in Woburn, Massachusetts, who is also a CPA.
Nowadays, many advisors are running multi-year forecasts to assess how the new regulations will affect taxes.
They emphasize that without a solid income plan, individuals might miss out on tax benefits they could be eligible for.
When discussing tax strategies, Guarino expressed a strong preference for avoiding certain complicated approaches.
Here are some key changes brought about by Trump’s legislation, effective in 2025, and their implications for taxes.
Trump’s 2017 Tax Cut Extension
The prominent Republican legislation has made various aspects of Trump’s 2017 tax cuts permanent, including lower tax rates and significantly increased standard deductions, which will reduce tax liabilities for many Americans.
If this extension hadn’t happened, most taxpayers could have faced higher taxes in 2026, according to a report by the Tax Foundation. However, the new law enhances Trump’s previous cuts and rolls out several tax reductions starting in 2025.
- The standard deduction will rise from $15,000 to $15,750 for single filers and from $30,000 to $31,500 for married couples.
- There will also be increases in the Child Tax Credit, with the maximum rising from $2,000 to $2,200 per child.
When it comes to itemized deductions, there’s a temporary cap on State and Local Tax (SALT) deductions, which will range from $10,000 to $40,000 in 2025.
For income, the threshold at which SALT profits will begin to decrease will shift from $500,000-$600,000 to $600,000, prompting some experts to refer to it as a “SALT torpedo.”
This shift may create a “sweet spot” for SALT deductions for incomes between $200,000 and $500,000, based on other bill provisions.
Trump’s New Tax Changes for 2025
The new tax and expense legislation introduces a temporary tax credit for 2025, which some speculated about during the 2024 presidential campaign. There’s a potential $6,000 “bonus” deduction for certain seniors aged 65 and older, targeting those with incomes of $75,000 or more for single filers or $150,000 for married couples filing jointly.
Additionally, new deductions for tip income, overtime pay, and car loan interest will come into play, though eligibility requirements will vary.
This chart outlines some important individual provisions effective in 2025 compared to previous laws.
Return of the Premium Tax Credit “Subsidy Cliff”
During the pandemic, Congress had extended the Premium Tax Credit until 2025, which had made health insurance more affordable. But Trump’s new laws do not extend these enhanced tax cuts. Without action, more than 22 million subscribers could see a rise in their healthcare premiums, according to a health policy organization.
Tommy Lucas, a registered agent at Moisand Fitzgerald Tamayo in Orlando, Florida, notes that this change could impact subscribers in the upcoming fall.
Starting in 2026, enrollees will need to brace for the ACA grant cliff. This essentially means if someone’s income exceeds $1, they may lose their premium tax credit.
Currently, most ACA participants receive at least some portion of the premium tax credit. However, the grant cliff stipulates that if registrants exceed 400% of the federal poverty level, they will lose their registration altogether. That threshold in 2025 will be around $103,280 for a family of three, according to the Healthcare Peterson Center and KFF.
