As President Donald Trump and Republicans in Congress work to extend changes made to the tax code during his first term, some beloved tax breaks could be on the chopping block.
Key features of the Tax Cuts and Jobs Act of 2017 are set to expire at the end of this year unless new legislation extends them. With the nation deep in debt, finding ways to pay for such an extension — and possibly to add some new cuts to the mix, as Trump has promised — will not be easy.
Recently, Politico obtained an informal document circulated among Republicans in Congress that lists changes that could potentially find their way into a new tax bill.
Some of the suggested changes could put more money in taxpayers’ pockets, as we detail in “4 Ways Republicans Want to Slash Your Income Taxes Under Trump.”
But other potential changes involve reducing or even repealing existing tax breaks.
It is important to emphasize that this is merely a working document, not a final proposal. With that caveat in mind, here are some key tax breaks that could disappear due to Republicans’ presumably forthcoming tax bill.
Itemized versus non-itemized tax breaks
Before we turn to the tax breaks, it’s important to understand the difference between tax breaks that are available to everyone and breaks that are available only to those who itemize their tax deductions.
When you file your return, you typically have the choice between claiming the standard deduction, a flat amount, or itemizing your deductions. The vast majority of Americans — about 88% — now take the standard deduction, which roughly doubled when the Tax Cuts and Jobs Act became law in 2017.
The precise amount of your standard deduction depends primarily on your tax-filing status, as we explain in “IRS Announces Standard Deductions and Tax Rates for 2025.”
On the other hand, a small percentage of the population finds that itemizing deductions lowers their tax obligation more than taking the standard deduction.
Examples of deductions that can be itemized — but that you can only claim if you itemize — include charitable gifts and medical expenses that exceed 7.5% of your adjusted gross income.
Now, on to the tax breaks that could potentially be on the chopping block.
1. The SALT deduction
How much the government would save if this tax break is repealed: An estimated $1 trillion over 10 years (compared to if the Tax Cuts and Jobs Act is extended)
This tax break is currently available to: Only people who itemize their tax deductions instead of claiming the standard deduction
The deduction for state and local taxes — often referred to as “SALT” for short — enables eligible taxpayers to deduct multiple types of state and local taxes, including:
- Real estate property taxes
- Personal property taxes (such as those based on the value of your car or boat)
- Income or sales taxes
The Tax Cuts and Jobs Act of 2017 capped the amount of state and local taxes that someone can deduct at $10,000 per year, making it much less generous than it was in the past.
Now, one of multiple changes Congress is considering making to the SALT deduction is doing away with it altogether. This might come as a surprise to many folks, as Trump pledged to “get SALT back” — meaning remove the current cap — during his campaign.
2. Mortgage interest deduction
How much the government would save if this tax break is repealed: An estimated $1 trillion over 10 years (compared to if the Tax Cuts and Jobs Act is extended)
This tax break is currently available to: Only people who itemize their tax deductions instead of claiming the standard deduction
Currently, eligible taxpayers can deduct a large amount of mortgage interest — typically all interest paid on the first $750,000 or $375,000 of their loan, depending on their filing status. Taxpayers who have a mortgage taken out prior to Dec. 16, 2017, may be able to deduct interest on up to $1 million of their loan balance.
Because this is an itemized deduction and so many people now take the standard deduction, the elimination of the mortgage interest deduction would not hurt as many homeowners as it would have in the past. Nonetheless, it would deprive some people of a big tax break.
3. Student loan interest deduction
How much the government would save if this tax break is repealed: An estimated $30 billion over 10 years
This tax break is currently available to: Anyone who qualifies for it — regardless of whether they itemize their tax deductions or claim the standard deduction
It’s no secret that millions of Americans are drowning in student loan debt — which collectively totaled more than $1.77 trillion as of late 2024.
This deduction enables eligible taxpayers to deduct up to $2,500 of the student loan interest they pay each year. But this is another tax break that could be headed for the scrap heap soon.
4. Municipal bond interest exclusion
How much the government would save if this tax break is repealed: An estimated $250 billion over 10 years
This tax break is currently available to: Anyone who qualifies for it — regardless of whether they itemize their tax deductions or claim the standard deduction
Interest earned on municipal bonds is not subject to federal income taxes. These state and local government bonds have long been a darling of high-income investors because they benefit more from the tax break on interest, according to the Tax Foundation. But it’s possible Congress is about to pull the plug on this tax break that appeals to the well-to-do and other investors.
5. American opportunity credit
How much the government would save if this tax break is repealed: An estimated $59 billion over 10 years
This tax break is currently available to: Anyone who qualifies for it — regardless of whether they itemize their tax deductions or claim the standard deduction
A pair of education tax breaks could also end up in history’s dustbin. One of them, the American opportunity credit, helps lower the cost of qualified education expenses, including tuition, during an student’s first four years of higher education.
Those who are eligible for the break — which could include students themselves or parents who pay for a student’s expenses — can claim a credit of up to $2,500 in each of the four years.
This credit is more valuable than most, because it’s partially refundable. In short, even if you don’t owe taxes, you can still receive up to $1,000 of this credit in the form of a tax refund.
6. Lifetime learning credit
How much the government would save if this tax break is repealed: An estimated $26 billion over 10 years
This tax break is currently available to: Anyone who qualifies for it — regardless of whether they itemize their tax deductions or claim the standard deduction
The lifetime learning credit is the second education credit that could be headed for the chopping block. It can be used to help pay for undergraduate, graduate and professional degree courses as well as courses taken to learn or improve job skills.
Unlike the American opportunity credit, this one isn’t refundable at all. But there is no limit on the number of years you can claim the credit, which can lower your tax bill by up to $2,000 per year during which you have eligible expenses.
7. Credit for child and dependent care
How much the government would save if this tax break is repealed: An estimated $55 billion over 10 years
This tax break is currently available to: Anyone who qualifies for it — regardless of whether they itemize their tax deductions or claim the standard deduction
The credit for child and dependent care offers a tax break to those who pay for someone to look after their child — or another qualifying dependent — so they can work or look for work. The total value of the credit depends on your income level and the amount of eligible care expenses you incur.
Add a Comment