Tax Changes Ahead: Summary of Key Changes for Individuals and Businesses
The new tax reform promoted by Donald Trump brings with it key changes that will impact both individual taxpayers and businesses. Below, we detail the main points of the proposal, which includes tax reductions, enhanced deductions, and new phase-out thresholds.
CHANGES FOR INDIVIDUALS
1. Individual Income Tax Brackets Now Permanent
The tax brackets introduced in 2017 (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are consolidated, thus avoiding the planned increase to 39.6% after 2025.
2. Increased SALT Deduction (State and Local Taxes)
The deduction limit is increased from $10,000 to $40,000 with no phase-out by income level. This change will take effect between 2025 and 2029, returning to the previous $10,000 limit in 2030.
3. New Deduction for Reported Tips
A deduction of up to $25,000 in tip income reported on the W-2 is allowed.
Phase-out:
• Begins at $75,000 of adjusted gross income (AGI) for singles and $150,000 for married couples.
• Complete phase-out at $100,000 (single) / $200,000 (joint).
4. Overtime Deduction
Ability to deduct:
• Up to $12,500 (single) / $25,000 (joint).
Phase-out phase:
• Starting at $60,000 (single) / $120,000 (joint).
• Complete phase-out at $90,000 (single) / $180,000 (joint).
5. Additional deduction for those 65 and older
Taxpayers 65 and older will be able to take an additional deduction of $6,000.
Phase-out phase:
• Starting at $85,000 (single) / $150,000 (joint).
• Complete phase-out at $120,000 (single) / $200,000 (joint).
6. Expanded child tax credit
The credit for children under 17 increases from $2,000 to $2,200 per child.
The phase-out threshold remains the same:
• Starting at $200,000 (single) / $400,000 (joint).
• A $50 reduction for every $1,000 above this threshold.
7. Federal Tax Exemption on Social Security Benefits
Social Security benefits will be exempt from federal tax if AGI is less than:
• $60,000 (single) / $100,000 (joint).
Above these thresholds, a graduated tax will apply as before 2025.
CHANGES FOR BUSINESSES
1. 20% Qualified Business Income (QBI) Deduction, Now Permanent
This deduction for income from entities such as LLCs or S-Corps remains in place indefinitely.
Phase-out:
• Starting at $200,000 (single) / $400,000 (joint).
Once these limits are exceeded, the deduction will be adjusted based on salary or business assets.
2. Increase in the limit for immediate depreciation (Section 179)
• The expense limit doubles, from $1.25 million to $2.5 million.
• The phase-out threshold begins at $5 million in qualifying purchases.
CONCLUSION
This new tax proposal, if approved, will consolidate many temporary measures from the 2017 package and bring additional benefits to both workers and employers. At Feliu N&I SL, we will continue monitoring this reform to offer you personalized advice based on your situation.
Do you have questions about how these changes will affect you?
📩 Contact us and we will help you optimize your international tax planning.
