When the Tax Cuts and Jobs Act overhauled the federal income tax landscape in 2017, the effect on individual taxpayers was supposed to be temporary. In fact, many of the federal law’s provisions affecting personal taxes are slated to expire at the end of this year.
But the return of President Donald Trump to the White House — and the fact that Republicans have full control of Congress — has breathed new life into a second round of tax reform.
Currently, House Republicans are working on a bill — dubbed “The One, Big, Beautiful Bill” — that would extend and expand some of the temporary tax breaks created by the 2017 law. They released a draft of the legislation on May 12.
Here’s a look at these tax breaks that may live on longer than originally expected — and enhanced in some cases.
Lower tax rates
The Tax Cuts and Jobs Act of 2017 lowered federal income tax rates for 2018 through 2025. As a result, you likely saw your taxes decrease starting in 2018, as we reported in “How Much Money Did Trump’s Last Tax Law Save Americans? You Might Be Surprised.”
The new bill would make the tax rates established by the 2017 law permanent. Here’s what the rates would be if the new legislation passes in its current form — and what the rates will be if it doesn’t:
- 10% if it passes (10% if it doesn’t)
- 12% (15%)
- 22% (25%)
- 24% (28%)
- 32% (33%)
- 35% (35%)
- 37% (39.6%)
The increased standard deduction
The standard deduction ballooned as part of the Tax Cuts and Jobs Act, nearly doubling in size, although only for 2018 through 2025.
The new legislation would make this large standard deduction permanent — and increase it even further for 2025 through 2028.
Here’s what the standard deduction would be for 2026, for example, if the new legislation passes in its current form — and what it will be if it doesn’t:
- For taxpayers whose filing status is single: $16,300 if it passes ($8,300 if it doesn’t)
- Head of household: $24,500 ($12,150)
- Married filing jointly: $32,600 ($16,600)
The increased child tax credit
The Tax Cuts and Jobs Act doubled the maximum value of the child tax credit from $1,000 to $2,000 per child, but only for 2018 through 2025. The new bill would make the higher limit permanent — and increase it further, to $2,500, for 2025 through 2028.
Also, after 2026, the child tax credit would be indexed for inflation, meaning it would gradually increase over time to keep pace with inflation.
The deduction for qualified business income
The Tax Cuts and Jobs Act created a temporary deduction worth up to 20% of qualified business income (QBI) from a partnership, S corporation, or sole proprietorship. Basically, people who own such a business generally can deduct up to 20% of their business income on their personal income taxes.
The QBI deduction also applies to some real estate investment trust dividends and publicly traded partnership income.
The new bill would make this deduction permanent and add a sweetener: The maximum amount of the deduction would rise from 20% to 23% starting in 2026.
The increased estate tax exemption
Prior to the Tax Cuts and Jobs Act, the estate tax exemption was $5.5 million for single filers and $11.1 million for married couples who file a joint tax return. That essentially meant if you left behind an estate worth more than those amounts, the estate was subject to federal estate taxes.
The 2017 law increased those exemption amounts substantially, but only through 2025.
The new legislation would make the larger estate tax exemption permanent. For 2026, for example, the exemption would be worth $15 million for single filers and $30 million to married couples filing jointly.
Add a Comment