Any Americans could pay much more in taxes starting in 2025. Here are the key points:
- Tax cuts passed under President Trump are set to expire
- This means higher taxes for many people, including the middle class
- Married couples with kids earning over $85,000 may pay thousands more
Do you know how the upcoming tax changes could affect your family? Read on to learn more.
Trump’s Tax Cuts Are Ending Soon
Inย 2017, President Donald Trump signed aย majorย tax cut law. This law lowered federal income tax rates for most Americans andย increased standard deductions and child tax credits.
However, these tax cuts have an expiration date – they will end after 2025 unless Congress takes action. Once the cuts expire, many people will see their taxes go up significantly starting in 2026.
Who Will Pay More in Taxes?
Even some middle-class families could get hit with significant tax hikes if the Trump tax cuts are allowed to expire without renewal or replacement. Here are some examples from tax experts:
- A single person with no kids earning $30,000 per year may pay $253 more
- A single person earning $75,000 could see a $1,700 tax increase
- A married couple with two kids earning $85,000 may owe $1,600 more
- With three kids, a couple earning $200,000 might pay an extra $7,400
So families making $85,000 or more per year, especially those with multiple children, could face hefty tax hikes unless the tax cuts are extended.
Married Couples Hit Hardest
Tax experts warn that married couples in their 30s and 40s earning around $200,000 per year could really struggle after 2025. At that income level with a few kids, people often feel stretched trying to pay for the following:
- Mortgage/rent
- Child care and activities
- Saving for retirement
- Family vacations
- Kids’ education costs
After working hard to reach a solid middle-class or upper-middle-class income, these families may feel they have little left over once the higher tax rates kick in.
Other Tax Increases Loom
On top of the expiring Trump tax cuts, some other possible tax hikes loom for certain taxpayers:
- Higher capital gains taxes on profits from investments
- Taxes on cryptocurrency gains
- Rates over 50% for top earners in high-tax states like California and New Jersey
So wealthy investors, crypto holders, and top-bracket earners in tax-unfriendly states could get hit from multiple angles.
The Political Debate
Republicans generally want to extend the Trump tax cuts to avoid raising taxes on ordinary Americans.
However, the Biden administration hasn’t committed to that. Some argue the tax cuts ballooned budget deficits and mainly benefited the wealthy.
With federal finances strained, Democrats may let at least some of the tax hikes take effect to raise more revenue.
Looking Ahead
Regardless of one’s politics, many regular Americans not in the top income tiers could face noticeable tax increases down the road. This impacts family budgets.
The next presidential and congressional elections in 2024 may determine whether the tax cuts get renewed, revised, or scrapped entirely.
With so much at stake for household finances, how much attention will you pay to the tax policy debate over the next couple of years? Significant changes seem likely .
