Impact of Trump’s Recent Legislation on Taxes

House Speaker Mike Johnson (R-LA) gathered with fellow Republicans in the Rayburn Room at the Capitol on July 3, 2025, to sign what’s been termed a “big beautiful bill.”

It’s been nearly two weeks since this significant piece of legislation was enacted, and financial advisors, along with tax professionals, are now analyzing its implications for their clients. Some changes set to take effect in 2025 will impact tax returns filed in 2026.

The Trump administration is highlighting “Tax reductions for working families,” but experts caution that the effects of the new law may vary widely based on individual situations. “There are so many moving pieces,” said Jim Guarino, a managing director at Baker Newman Noyes, also a Certified Public Accountant.

Advisors are currently running multiple forecasts over the next few years to gauge how these new regulations will influence taxes. They stress the importance of an income plan to maximize potential tax benefits.

Overview of Trump’s Extended Tax Cuts

One major takeaway is that the Republican-led legislation has made Trump’s 2017 tax cuts permanent, which significantly lowers tax rates and boosts standard deductions. Without this extension, many filers would have faced higher taxes in 2026, according to a 2024 report by the Tax Foundation. The new legislation builds on those cuts with additional 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.
• The child tax credit will also see an increase, with maximum benefits expanding from $2,000 to $2,200 per child.

For those itemizing deductions, there’s a temporary cap on state and local tax deductions (SALT). In 2025, this cap will range from $10,000 to $40,000. Additionally, there’s a significant tax rate increase, sometimes referred to by experts as “salt torpedoes,” for incomes between $500,000 and $600,000, leading to effective rates as high as 45.5%. This creates a “sweet spot” for those earning between $200,000 and $500,000.

New Tax Adjustments Coming in 2025

Alongside adjustments to existing credits, Trump’s legislation introduces a temporary $6,000 “bonus” deduction for older Americans over 65. This applies to single filers earning over $75,000 and married couples filing jointly with income over $150,000. Additionally, there are new deductions on tip income, overtime pay, and car loan interest, each with specific eligibility criteria.

The importance of understanding these individual provisions and how they compare to previous laws cannot be overstated.

Premium Tax Credit Changes

During the pandemic, Congress expanded premium tax credits, making health insurance more affordable. However, these increased benefits won’t be continued under Trump’s new laws, which could result in higher costs for over 22 million subscribers if no action is taken. This concern is echoed by Tommy Lucas, a registered agent at Moisand Fitzgerald Tamayo in Orlando, Florida, who notes it could impact subscribers as soon as this fall.

Come 2026, enrollees need to be aware of the “ACA grant cliff.” If earnings exceed a set threshold, they risk losing their premium tax credit. Currently, most enrollees benefit from at least some form of this credit, but exceeding 400% of the federal poverty line—about $103,280 for a family of three in 2025—could result in losing coverage.