Trump Era Tax Cuts Are Expiring: What to Know About Future Tax Payments for Millennials
Written by
Dawn Allcot
Edited by
Sean Fisher
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With tax cuts enacted by Donald Trump expiring at the end of 2025, tax planning is starting to look different. Wealthy families are gifting millions of dollars to charity or placing them in trusts for their children to preserve their wealth.
However, many elements of the Tax Cuts and Jobs Act (TCJA) that are expiring also affect lower- and middle-income earners, including millennials who may not have amassed large amounts of wealth but are hoping to keep more of what they earn to buy a house, start a family, or pay down student loan debt.
Let’s look at some of the tax cuts set to expire and ways millennials can avoid facing a larger tax bill in 2026.
Income Tax Rates Change
The TCJA lowered tax rates and restructured tax brackets, so that you could make more money yet still fall into a lower bracket. As a comparison, single people could earn up to $41,775 in 2022 and fall into the 12% tax bracket, the second lowest. In 2017, the second tax bracket had to pay 15% and could earn up to $37,950.
The tax rates are expected to revert back to the higher figures if the TJCA expires. Brackets will likely be adjusted for inflation, but are likely to mimic the lower 2017 income figures once adjusted. Americans could pay 1% to 4% more in taxes in 2026 unless they make adjustments to their tax deductions, GOBankingRates previously reported.
Smart Tax Planning Move
Millennials should consider increasing contributions to their 401(k) to reduce their taxable income to make up for the changes. Increasing retirement savings always makes sense, but it can be an important tax strategy for 2026.
Also, consider opening a Health Savings Account (HSA) or Health Flexible Spending Account (HFSA), funded with pre-tax dollars. In 2023, this could deliver up to $3,850 in tax deductions for individuals and up to $7,750 for families and those figures could increase by 2026.
Reduction in Standard Deduction
Trump era tax cuts increased the standard deduction from $12,700 to $25,900 for married couples filing jointly and from $6,350 to $12,950 for single taxpayers. With the change, more families claimed the standard deduction rather than itemizing.
These figures will return to previous levels (adjusted for inflation) in 2026.
Smart Tax Planning Move
If the standard deduction reverts to prior levels, millennials may want to go back to itemizing returns. That means tracking work-related expenses, medical and dental expenses, and other deductions carefully — and making sure you claim everything that you are entitled to.
With more complicated tax returns in 2026, tax professionals may charge more for their services. You may want to budget a little more money for tax prep in 2026 unless you typically tackle the task yourself.
Keep in mind, in 2023 you can also claim student loan interest as a write-off, even without itemizing deductions. You can deduct up to $2,500 in interest paid, which means if you can eek out more than your minimum payments in the next four months, you might reduce your tax bill.
Estate Tax Exemptions Return to Original Levels
Baby Boomers are expected to pass on up to $53 trillion in wealth to their millennial and Gen Z children over the next 10+ years, according to a report from DailyMail.co.uk.
If you are a millennial that faces a large inheritance in the years to come, you might want to plan ahead to avoid tax ramifications of your windfall. Under the TCJA, individuals could pass on up to $12.92 million in assets, while married couples could pass on $25.84 million.
Smart Tax Planning Move
To avoid up to 40% estate tax on this money if TCJA laws expire, speak to your family members about setting up a trust or gifting you portions of your inheritance now, up to current allowable limits.
Bottom Line
Changes may be coming to your tax bracket, deductions, and tax rates in 2026. Careful planning can help you minimize tax liability and keep more of what you earn.
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