5 Things the Upper Middle Class Should Do To Prepare for Trump’s Income Tax Plan
Written by
G. Brian Davis
Edited by
Jenna Klaverweiden
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At over 1,000 pages long, the One Big Beautiful Bill Act certainly qualifies as “big.” It includes dozens of provisions that affect upper-middle-class taxpayers, from preserving the child tax credit to eliminating income taxes on tips and overtime to most workers and more. But many of those provisions don’t actually require any planning or preparation.
So which tax changes should upper-middle-class Americans pay attention to now so they can prepare if the bill passes?
Rethink Itemizing Deductions
The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction and capped state and local tax (SALT) deductions at $10,000. Both of those changes led many upper-middle-class Americans to stop itemizing and just take the standard deduction.
The new tax bill would make the double standard deduction permanent, and add an extra $1,000 from 2025 to 2028 for single filers or $2,000 for married couples. But the SALT cap would quadruple to $40,000 for all but the highest-income taxpayers.
“The controversial SALT deduction cap jumping to $40,000 would change the calculus on itemizing for many upper-middle class households,” explained Elina Linderman, accountant and owner of La Rusa. That means you should start saving receipts and tracking deductible expenses now, in case you can save more on taxes by itemizing deductions.
Reevaluate HSAs
Health savings accounts (HSAs) come with many tax benefits. You can deduct contributions, the money compounds tax-free and you pay no taxes on withdrawals if they’re used for qualifying expenses.
The new bill would double the contribution limit from $4,300 to $8,600 for individuals making less than $75,000 per year and from $8,550 to $17,100 for families making less than $150,000 annually. However, the contribution limit would start phasing out for individuals earning an adjusted gross income over $100,000 ($200,000 for married couples).
As GOBankingRates previously reported, the household income for the upper middle class is between $106,000 and $150,000, so certain households may qualify to contribute more to their HSAs with this provision. Keep an eye on these changes in the final bill, and consider either opening an HSA or contributing more to it if you can.
Act Now If You’re Considering Solar Energy Upgrades
Tax professor Annette Nellen at San Jose State University noted that upper-middle-class homeowners should jump on any solar panel installations they’ve been considering.
“Residential energy credits would end on 12/31/25, including the 30% credit for solar panels on your personal residence,” she said.
Revisit Your Estate Plan
The Tax Cuts and Jobs Act nearly doubled the gift and estate tax exemption. That higher exemption limit is currently scheduled to sunset at the end of 2025.
In 2025, the exemption stands at $13.99 million per individual ($27.98 million for married couples). Under the One Big Beautiful Bill Act, that would rise to $15 million and $30 million, respectively, in 2026 and be indexed to inflation thereafter.
That may affect your estate planning as an upper-middle-class family, so speak with a financial planner about a personalized gifting strategy.
Explore Private Equity Real Estate Investments
Likewise, the new tax bill would extend another provision of the Tax Cuts and Jobs Act: bonus depreciation.
Bonus depreciation allowed real estate investors to write off up to 100% of the cost of a building in the year they purchased it. The act scheduled it to phase out, however, from 100% in 2022 to 0% in 2027.
Under the new law, bonus depreciation would revert to 100% from 2025 through January 1, 2030. That could add a huge tax incentive for private equity real estate investments. Investors can show losses on their tax return, even as they collect cash flow in real life — and they don’t have to itemize to do it.
Private equity real estate investments have historically served the wealthy, with high minimum investments in the $50,000-to-$100,000 range. But the upper middle class can invest with as little as $5,000 by joining a co-investing club to go in on them with other investors.
“The upper-middle class can capitalize on real estate investment and increased property ownership, whether they itemize deductions or not,” said Hector Castaneda of Castaneda CPA & Associates.
The final bill that passes both houses of Congress will likely look different from the current bill, so sit down with a tax advisor to form a personalized plan when the final rules become law.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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