On Thursday, the House voted 218-214 in favor of passing President Trump’s bill. Today, Trump will hold a bill signing ceremony at 5 p.m. Eastern Time to sign the bill into law.
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Of course, the topic that many American citizens are concerned about is the tax implications of the bill. Let’s dive in.
First, the standard deduction will increase to $15,750 from $15,000 for single filers and $31,500 from $30,000 for married couples filing jointly.
Next, the maximum state and local tax (SALT) deduction will rise to $40,000 from $10,000. It will increase by 1% through 2029 before reverting to $10,000 in 2030. However, all filers making more than $500,000 per year will be subject to SALT deduction phase-outs. The deduction only applies to people who choose to file an itemized tax return.
Specific Tax Breaks from Trump’s Megabill
Parents will benefit from the bill, as the child tax credit will increase by 10% to $2,200 from $2,000 beginning next year.
Workers who receive tips will be able to deduct up to $25,000 of tip money from their taxes. The deduction is lower for workers making more than $150,000. Overtime workers will receive a maximum overtime pay deduction of $12,500 for single filers making up to $150,000 and $25,000 for married couples. The new policies for tip and overtime workers only apply on a federal level and not on a state level; they will be in effect from 2025 to 2028.
For car buyers, the $7,500 electric vehicle tax credit for new vehicles and $4,000 tax credit for used EVs will expire on September 30. At the same time, taxpayers will be able to deduct up to $10,000 in auto loan interest payments from their taxable income if the purchased vehicle is made in the U.S. The deduction decreases for those with an income above $100,000.
Finally, people above the age of 65 making $75,000 or less will be able to deduct $6,000 from their taxable income. Married seniors making $150,000 or less will be able to do the same.
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