What Trump’s New Tax Law Means for Upper-Middle-Class Families Beyond 2025
Written by
G. Brian Davis
Edited by
Rebekah Evans
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A 2025 study by GOBankingRates found that incomes between $106,092 and $149,160 are enough to count residents as upper-middle class in most states. But it varies wildly by location, with more expensive states such as Maryland requiring an income over $158,126 to qualify.
The One Big Beautiful Bill Act (OBBBA) made plenty of changes to the tax law. If you earn six figures, watch out for these tax law changes.
Extended Marginal Income Tax Rates
The Tax Cuts and Jobs Act of 2017 (TCJA) lowered marginal tax rates. However those lower brackets were scheduled to sunset at the end of 2025.
The OBBBA makes those tax rates permanent, with brackets indexed to inflation. “Due to our progressive tax system, this means the upper-middle class is likely to pay taxes at the 10%, 12% and 22% brackets,” explained Chris Nemes, partner at Nemes Rush Family Wealth Management. “If the OBBBA hadn’t passed, they would’ve expected to pay taxes at the pre-2017 tax rates of 10%, 15% and 25%.”
SALT Cap Relief
The OBBBA also expands the cap on state and local tax (SALT) deductions from $10,000 to up to $40,000. “If you live in a high-tax state and earn an upper-middle-class income, you’ll be able to potentially deduct a lot more on your federal taxes than you could before,” said Scott Sturgeon, certified financial planner (CFP) with Oread Wealth.
The deduction phases out for households earning more than $500,000 per year, dropping back to $10,000 for those earning over $600,000. Starting in tax year 2030, the SALT deduction will permanently revert back to $10,000.
Most single filers will still only be able to deduct $10,000 however. Married couples filing separately can deduct up to $20,000 and those filing jointly can deduct up to the full $40,000.
New Bonus Deduction for Older Americans
Rather than making Social Security income tax-free — which would have required some convoluted rules — the OBBBA created a new “bonus deduction” of $6,000 for Americans over 65.
Matt Hylland, financial planner at Arnold and Mote Wealth Management, said the new deduction comes with some caveats. “The new $6,000 deduction per person over age 65 begins to phase out with incomes over $150,000. Some retired upper-middle-class households may now be able to do more tax strategies like Roth conversions,” Hylland added.
The deduction expires after 2028, so older taxpayers should take advantage of it now.
Estate Tax Eliminated for Most Families
The TCJA had roughly doubled the estate tax exemption, but it was scheduled to revert back after 2025. Now, the OBBBA made the higher exemption permanent.
Starting next year, the exemption rises to $15 million per individual ($30 million for married couples). After that, it rises based on inflation.
“Estate planning for most high-earners now shifts from tax avoidance to maximizing the step-up in basis for heirs or conversion to after tax accounts,” said Sean Lovison of Purpose Built Financial, certified public accountant (CPA).
Changes to Charitable Giving
The OBBBA also adds a minimum floor for deducting charitable contributions. To deduct donations, households must donate at least 0.5% of their adjusted gross income each year to charity.
“The new floor makes ‘bunching’ contributions into a Donor-Advised Fund a far more effective strategy than making smaller annual gifts,” Lovison added.
American Car Loan Interest Deductible
To incentivize buying American cars, the OBBBA makes auto loan interest deductible for new cars assembled in the US. However, Nemes explained that it comes with income limits. “Couples earning less than $200,000 can deduct up to $10,000 in qualifying car loan interest annually,” Nemes added.
The deduction sunsets after the end of 2028 however, so plan accordingly.
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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