Trump-Era Tax Cuts Are Expiring: 4 Ways This Impacts Average Wage Earners
Written by
Josephine Nesbit
Edited by
Nicholas Morine
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As we head into tax filing season, many Americans have already noticed that they’re paying more in taxes than in previous years, while others have received lower refund checks from the IRS. While many Trump-era tax cuts are due to expire by the end of 2025, some other changes have already taken effect for average wage earners.
Enacted by former President Donald Trump in 2017, the Tax Cuts and Jobs Act (TCJA) completely overhauled the nation’s tax code, reducing five of seven tax brackets and nearly doubling the size of the standard deduction. According to H&R Block, the average tax reduction was $1,200 based on returns the company processed in 2018. However, after 2025, millions of taxpayers could face steeper levies if this law isn’t extended.
Individuals Will Likely Pay More if Trump-Era Tax Cuts Aren’t Extended
Individual income tax brackets will revert to 2017 levels, increasing anywhere between 1% to 4% for many Americans, Fox Business reported.
The standard deduction will also be cut roughly in half, which will be $6,350 for single filers and $12,700 for those filing married and jointly, both indexed for inflation, according to the Cato Institute. For 2024, the standard deductions are $14,600 for single filers and $29,200 for married taxpayers filing jointly.
The personal exemption of $5,300 will return, but the child tax credit will also be reduced from $2,000 per qualifying child to $1,000. The $500 credit for other dependents will disappear.
It’s unknown whether any of the TCJA provisions will be extended or modified, and as we head into the 2024 primary season, President Biden and Republicans vying for the 2024 presidential nomination have yet to come forward with tax proposals.
According to CNN, all candidates want to extend at least some of the measures in the 2027 TCJA. The individual income tax provisions will be a top priority for whoever wins the November election.
Investment advisor Patrick Donnelly told the Daily Mail that people must start thinking strategically about a tax strategy between now and 2026. “I try to make sure clients aren’t going to be kicking themselves in 2026 because they didn’t take advantage of these incredibly favorable tax rates when they had the chance.”
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