How Renewal of the Tax Cuts and Jobs Act Could Affect Your Wallet
Written by
Adam Palasciano
Edited by
Levi Leidy
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The Tax Cuts and Jobs Act (TCJA) of 2017, which was signed into law during President Donald Trump’s first term, lowered tax rates overall. While the current legislation is slated to expire on Dec. 31, 2025, if Congress doesn’t act to extend it, the bill’s renewal is very likely given that Trump is back in office again and there’s a Republican majority in Congress.
Despite the majority support, the administration and Congress will need to find a source to fund extensions or any budget resolutions. Here are a few key takeaways for how this could impact your finances and tax bill in the future:
- It’s estimated that any tax cuts of the TCJA could decrease federal tax revenue by $4.5 trillion from 2025 through 2034.
- This has the president’s full support, as he has called for permanent extension of the 2017 tax cuts which include not only the Jobs Act but also Social Security benefits, taxes on tips, and more.
- Trump’s tariffs means higher taxes on U.S. imports, which will likely increase the cost of goods you regularly buy or consume.
Here are two ways that the renewal of the TCJA under the Trump administration could affect your wallet.
The Wealthy Will Benefit From Unchanged or Lower Tax Rates
Kaufman Rossin explained that there will likely be a tax break for “just about everyone” on the list of cuts that President Trump promised. These range from putting a stop to income-tax rate increases scheduled for 2026 as well as eliminating taxes on tips and Social Security income. However, the wealthier you are, the more tax benefits you will probably enjoy under Trump’s second term.
Overall, the outlook for middle- and lower-income taxpayers is less optimistic with Trump in office. He has floated the idea of more narrow tax breaks for targeted groups of lower-income Americans. In short, the renewal of the TCJA would likely pave the way for tax-friendly policies that may disproportionately benefit top earners at the expense of middle- and lower-income Americans.
New Tariffs Could Drive Up the Cost of Consumer Goods
One of Trump’s biggest campaign promises was to implement sweeping tariffs, and he’s following through on what was promised. He’s issuing tariffs as high as 145% on imported Chinese goods as well as a 10% or 20% tariff on imports from anywhere else in the world. The Trump administration’s introduction of new tariffs will impact American families across the board and could greatly increase the cost of living.
The Department of Commerce now has systems in place to process and collect revenue from the imposed tariffs. Many financial experts and economists say this could cost people anywhere between an estimated $4,000 to almost $8,000 per household.
Experts also estimate that this type of policy would raise a net $2.8 trillion or $4.5 trillion in federal funds over 10 years and would be the biggest offset to Trump’s proposed tax cuts. At the same time, the direct effect of tariffs would likely mean that companies would pass on their higher cost and raise prices on imported consumer goods.
Howard Gleckman, a tax policy center senior fellow, explained to Barron’s that tariffs ” … would effectively be a significant tax increase,” averaging about $1,800 annually per household with a 10% tariff or $3,000 with a 20% tariff.
The impacts of upcoming tax policy changes remain to be seen, but we can certainly expect them to affect all Americans.
Caitlyn Moorhead contributed to the reporting for this article.
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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