Trump 2026: 5 Tax Changes To Expect in Trump’s 2nd Year of His 2nd Term
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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President Donald Trump’s second year of his second term brings a very different tax environment than his first. Instead of a sweeping overhaul like 2017’s Tax Cuts and Jobs Act (TCJA), 2026 could be defined by smaller and more temporary changes.
For households trying to anticipate what’s different this year, here are five tax changes that could affect you this coming year and might even retroactively affect your 2025 taxes.
1. Expiration of ACA Enhanced Subsidies
Perhaps the most notable change is to the expiration of the enhanced tax credits for the Affordable Care Act (ACA). These were originally introduced during COVID-19 to allow more taxpayers to lower their healthcare premiums, explained Tom Taulli, enrolled agent and owner of Blue Sky Tax Prep. “However, the new tax law reverts them prior to the passage of the American Rescue Plan Act of 2021.”
While the House recently passed legislation to undo this, the Senate blocked it. “Yet with the mid-terms upcoming, there may be increasing pressure for Congress to make changes. But Trump may veto this,” Taulli theorized.
Another shift is that “essentially all renewable energy credits were nuked in 2025 or 2026” rather than expiring around 2032, according to Micah Fraim, a CPA and founder of Fraim CPA.
While provisions with explicit sunset windows are the most likely to shift, even “permanent” rules can change whenever Congress revisits them, said Scott Mahoney, a CFP and financial advisor at Family Wealth Management.
2. Targeted Small Changes
The policy approach in Trump’s second term will focus on narrower but more visible tax benefits rather than big overhauls. While Trump passed more sweeping and comprehensive TCJA of his first term, in his second term, “the changes are more targeted, such as with changes to the state and local tax deduction (SALT), senior deduction, tax breaks on tips and overtime and so on,” Taulli said.
These newer changes are also more temporary, often lasting between three and five years, Taulli noted. “Of course, a key reason for more reticence with the current tax law is the growing deficit.”
Mahoney added that lawmakers now tend to prioritize highly visible items like deductions tied to tips, overtime or auto loans instead of focusing on rate cuts and standard deduction changes.
3. Retroactive Deductions
Some of the fastest impacts are showing up at tax filing time. Retroactive deductions and income-based phaseouts can lead to larger refunds or unexpected outcomes for taxpayers who didn’t adjust withholding, Taulli noted.
“For example, taxpayers can deduct up to $25,000 of qualified tip income on their 2025 returns. For overtime workers, the deduction is up to $12,500.”
Mahoney noted that households near major income thresholds can experience the quickest effects on their tax returns, though this may benefit higher earners more than average or lower earners. “A taxpayer around the $500,000 to $600,000 AGI range could see a big reduction in SALT benefit after realizing a large capital gain in a single year.”
4. Overstated Deductions That Cause Misleading Expectations
Several of the most talked-about tax changes create misleading expectations, Fraim said. While the benefits are real, there are many limits on how much relief most taxpayers actually receive.
For example, the “no tax on tips” and “no tax on overtime” provisions are both very overstated, Fraim explained. “The deduction is only for the 2025 to 2028 tax years. The tips deduction caps at $25,000 per tax return, and the overtime deduction caps at $12,500 for single taxpayers and $25,000 for married couples.”
Mahoney concurred, saying that headlines about these tax breaks are “often overstated because caps, phaseouts and exclusions limit who actually benefits.”
5. SALT Deductions That Require Itemizing
Another example of confusion around these tax breaks is the higher SALT cap, whose complexities make it less generous than it first appears. “Many households won’t see a meaningful change. Itemization rules and state-level conformity issues continue to complicate the real-world impact of these provisions,” Fraim said.
Additionally, “only 9% of taxpayers itemize their deductions anymore because of the higher standard deduction,” Fraim added.
Taxpayers hoping to benefit from the increased SALT deduction need to see if it makes sense to itemize their deductions, Taulli said. Anyone hoping to take advantage of the changes to overtime and tips deductions should also update their W-4. “You do not want more of your income held by the government. It’s essentially an interest-free loan to them,” Taulli added.
How To Think About Tax Planning With These Temporary Breaks
With temporary provisions and unresolved implementation details, experts said conservative planning and scenario modeling are key.
Mahoney’s advice is to “assume today’s favorable rules may not last” and forecast any actual benefits before claiming these deductions. And since retroactive changes can lead to problems with implementation, Taulli warned, “expect confusion. You should also be prepared for maybe having to file amended returns.”
In a year of temporary rules, understanding the fine print matters more than ever.
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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