Trump Tax Cuts to Expire: Here’s How Much You'll Pay

In a file photo, a postal worker is seen putting stamps on envelopes heading to the IRS Monika Graff/Getty Images

As the Biden administration this week signaled it is aiming to push for some of the Trump-era tax cuts, slated to expire at the end of next year, Americans may have to pay more in taxes unless Congress doesn’t renew it.

U.S. Treasury Secretary Janet Yellen said this week that the Biden administration is looking to extend portions of former President Donald Trump’s Tax Cut and Jobs Act measure that was passed in 2017 and is slated to expire as of Dec. 31, 2025.

“The president is clearly focused on tax fairness,” she stated. “He’s going to be focused on making sure that tax cuts disappear for those corporations, and we’re not negotiating new tax breaks for wealthy individuals.”

However, the latest comments appear to contrast with previous statements issued about the Biden administration regarding the tax cuts. In late 2023, White House press secretary Karine Jean-Pierre blamed tax cuts of the past 20 years for some 90 percent of the debt growth. And in January, Ms. Yellen told reporters that extending the tax cuts would lead to “serious concerns” regarding how to handle U.S. government debt.

What It Means

Notably the tax cut bill created several changes to the U.S. tax code, including to income tax rates.

The tax law, passed by Republicans with no Democratic support at the time, lowered the corporate rate from 35 percent to 21 percent and cut individual taxes across income brackets for eight years. It doubled the standard deduction and enhanced the child tax credit. And it closed or tightened various tax breaks most notably by capping the amount of state and local taxes that can be deducted which had its biggest impact on residents of high-tax, largely Democratic-run states.

Under the law, highest individual tax bracket dropper from 39.6 percent to 37 percent, while the 33 percent bracket dropped to 32 percent, the 28 percent bracket dropped to 24 percent, the 25 percent bracket went to 22 percent, and 15 percent bracket went to 12 percent.

If it reverts back to the pre-2017 brackets, it means that every taxpayer might need to look at their spending because they could pay up to 4 percent more in taxes unless the provisions are extended within the next two years or so.

An expiration of the plan will have major impacts on estate and gift taxes for individuals. The measure doubled the gift and estate tax exemptions, raising it to $11.18 million in 2018 from $5.49 million in 2017.

When adjusted for inflation, the exemption now stands at $12.92 million, meaning that an individual can pass that amount in assets without paying federal gift or estate taxes.

As for standard deductions, less income is subject to being taxed under the Tax Cuts and Jobs Act (TCJA). It increased that deduction to $12,000 for single filers from $6,5000, $24,000 for joint filers or up from $13,000 pre-2017, and $18,000 for the heads of a household, which is up from $9,550, according to the Tax Foundation.

The vast majority of Americans, according to a Forbes estimate, opt to use the standard deduction when filing their taxes. That’s opposed to using itemized deductions.

It also affected a controversial provision under the Affordable Care Act, also known as Obamacare, which mandated that every adult have health insurance. The individual mandate had penalized $695 per adult, or 2.5 percent of household income, before its repeal.

Warning

Julio Gonzales, tax professional and the CEO of Engineered Tax Services, warned in an editorial that Congress faces the “harsh reality” of potentially rescinding the tax cuts, which would cause havoc for numerous businesses and families.

“We are in a situation in which many American families and businesses are hanging on by a thread. Letting the non-permanent provisions of the TCJA expire could be catastrophic to our overall economy and the well-being of many working families,” Mr. Gonzalez wrote for RealClearPolitics.

His editorial then warned that “individuals seeking to preserve their wealth and businesses should begin financial planning around the expiration of the non-permanent provisions of the TCJA” and to “plan for the worst and hope for the best, as they say.”

“The bottom line? If you think the economy is bad now, it’s going to get a lot worse if Congress lets the non-permanent provisions of the TCJA expire,'” he stated. “We must demand that our elected representatives don’t allow this to happen.”

The Associated Press contributed to this report.