Congress has been busy again, and they’ve handed us a 389-page tax proposal that’s…surprisingly full of goodies. Don’t worry, we’ve read it so you don’t have to, and we’ve broken it down into something far easier to digest than a stack of IRS codes.
Here’s your quick and mostly painless guide to what’s being proposed:
Tax Brackets Stay Put (Permanently)
They’re keeping the current brackets and throwing in a little extra frosting on top:
- Standard deduction bumps up to $16,000 for single filers and $30,000 for joint filers
- These numbers will be inflation-adjusted in future years as well
- Folks over 65 get a bonus deduction at $2,000 for single filers and $1,600 per spouse filing jointly—but these start to phase out at $75,000 of income for single filers and $150,000 for joint filers.
Child Tax Credit Boost
Going from $2,000 to $2,500 per child. But like a trendy pop-up shop, it drops back to $2,000 in 2029 (still inflation-adjusted).
AMT Stays the Same, SALT Gets Spicy
- AMT exemption levels remain at $88,100 for single filers and $137,000 for joint filers
- Phase-out thresholds at $626,350 for single filers and $1,252,700 for joint filers
- SALT deduction cap raises from $10,000 to $30,000
- This is phased down for taxpayers with $400K-$500K income (joint filers) or $200K-$300K (single filers).
Goodbye Pease Limitation, Hello…Math?
The sneaky Pease deduction cap is out. In comes a new limitation for those in the 37% tax bracket involving “two thirty-seconds” of this or that—basically, it’s a fancy way of saying “less itemized deductions for high earners.”
Overtime and Tips = Tax-Free (Temporarily)
Tips and OT won’t be taxed from 2025–2028. So if you’re planning a side hustle, mark your calendar.
Small Business Owners, Rejoice
For owners of pass-through business entities (sole proprietorships, partnerships and S corporations), the Qualified Business Income (QBI) deduction increases from 20% to 23%. That’s more money in your pocket to spend on printer ink!
New Car? New Deduction
Interest on your car loan for your new personal vehicle may be tax-deductible but only if your new wheels were assembled in the good ol’ USA.
Estate Tax Exemption Grows
The exemption jumps to $15 million per person ($30 million per couple). That’s one way to give your heirs something to smile about.
Introducing the ‘MAGA’ Account
This one’s for kids under age 8.
- Parents can contribute up to $5,000/year through age 17
- Account grows tax-deferred, but contributions would not be tax-deductible
- Can only be invested in all-American mutual funds or ETFs
- Withdrawals taxed like capital gains, and only for college, first homes, or launching the next great startup (or farm)
We’ll keep you posted as this bill makes its way through the legislative meat grinder. In the meantime, if you have any questions about how this might affect you, give us a shout. We’ll do the math so you don’t have to.
Sources
https://www.wsj.com/politics/policy/what-is-in-republican-tax-bill-39809182