02/19/2025
The New Tax Plan: Abridged
As one of the largest pieces of tax reform legislation in over 30 years, Trump’s Tax Cuts and Jobs Act comes with a whirlwind of changes that will affect taxpayers nationwide. From Trump’s new tax brackets to new interest deduction limits, the TCJA made a number of adjustments to individual income tax code that hopes to provide the average household with a more generous tax return. While there are a number of tax law changes to note and understand, the major key elements can be simplified to four leading points.
The Internal Revenue Service estimates that the time to complete an individual tax return will decrease by 4 to 7 percent. Tax Foundation estimates that by optimizing tax filing processes, compliance savings could range anywhere between $3.1 billion to $5.4 billion. This is also a promising figure backing the claim that the TCJA simplifies filing operations.
TCJA will modify the seven current tax brackets by lowering the top tax rate percentages, so instead of the current brackets scaling at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%, the newly modified brackets will be 10%, 12%, 22%, 24%, 32%, 35% and 37%. The corresponding income thresholds to these tax rates will be slightly adjusted as well.
New limits applied to certain itemized deductions such as mortgage interest and state and local taxes paid aims to broaden the tax base and minimize distortions within the tax code. However, these tax deduction changes also come with a sharp increase in the standard deduction.
An augmented revisitation of the child tax credit has made a wider range of taxpayers eligible for qualification— effectively phasing out the previous restriction that barred families over the income threshold of $110,000 from eligibility.
What does Trump's Tax Reform mean for taxpayers? This article breaks down the key changes and how they could impact your wallet.
