President Trump signed the Tax Cuts and Jobs Act into law in December 2017. This bill largely didn’t affect individual income taxes until the 2018 tax year, which you filed in early 2019. How exactly the Trump tax plan affects you depends on your income, your current filing status and the deductions you take. But because of tax code changes, you might want to work with a financial advisor to optimize your tax strategy for your financial goals.
A Brief History of the Tax Plan
In 2017, House Republicans and President Trump worked to introduce a tax bill that would simplify the tax system. They unveiled their long-awaited tax bill, the Tax Cuts and Jobs Act (TCJA) on Nov. 2, 2017. The bill called for sweeping changes to the current tax law.
The House passed the final version of the bill on Dec. 20, 2017, with a final tally of 224-201. Twelve House GOP members and all Democrats opposed the legislation. Originally, the House passed the bill on Dec. 19, but another vote was necessary because several provisions of the bill reportedly violated Senate rules and needed to be removed. The Senate passed the corrected version of the bill in the early morning hours of Dec. 20, voting 51-48 along party lines. President Trump then signed the bill into law on Dec. 22, 2017.
Most of the tax changes in the TCJA went into effect in January 2018, for the 2018 tax year. That means the changes didn’t affect many 2017 tax returns (you filed 2017 taxes in early 2018). Employees didn’t see changes in their paycheck withholding until February 2018.
Trump Tax Brackets – Still Seven Total
Trump’s tax plan originally called for cutting the number of tax brackets in the federal income tax system from seven to four, but the final version of the bill maintains the seven brackets. It did, however, change their rates.
Previously, the tax brackets went up to a top rate of 39.6%. The new tax brackets, which applied as of January 2018, have rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. These are the rates that determine your tax bill and still apply in 2024.
The table below breaks down the brackets for single and joint filers. If you use have a different filing status, make sure to read our full breakdown of the current tax brackets:
2024 Federal Income Tax Brackets
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
| 10% | $0 – $11,600 | $0 – $23,200 | $0 – $11,600 | $0 – $16,550 |
| 12% | $11,600 – $47,150 | $23,200 – $94,300 | $11,600 – $47,150 | $16,550 – $63,100 |
| 22% | $47,150 – $100,525 | $94,300 – $201,050 | $47,150 – $100,525 | $63,100 – $100,500 |
| 24% | $100,525 – $191,950 | $190,751 – $383,900 | $100,525 – $191,950 | $100,500 – $191,950 |
| 32% | $191,950 – $243,725 | $383,900 – $487,450 | $191,950 – $243,725 | $191,950 – $243,700 |
| 35% | $243,725 – $609,350 | $487,450 – $731,200 | $243,725 – $365,600 | $243,700 – $609,350 |
| 37% | $609,350+ | $731,200+ | $365,600+ | $609,350+ |
Here’s a look at the federal tax brackets for tax year 2023 (taxes due April 15, 2024):
2023 Federal Income Tax Brackets
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
| 10% | $0 – $11,000 | $0 – $22,000 | $0 – $11,000 | $0 – $15,700 |
| 12% | $11,000 – $44,725 | $22,000 – $89,450 | $11,000 – $44,725 | $15,700 – $59,850 |
| 22% | $44,725 – $95,375 | $89,450 – $190,750 | $44,725 – $95,375 | $59,850 – $95,350 |
| 24% | $95,375 – $182,100 | $190,750 – $364,200 | $95,375 – $182,100 | $95,350 – $182,100 |
| 32% | $182,100 – $231,250 | $364,200 – $462,500 | $182,100 – $231,250 | $182,100 – $231,250 |
| 35% | $231,250 – $578,125 | $462,500 – $693,750 | $231,250 – $578,125 | $231,250 – $578,100 |
| 37% | $578,125+ | $$693,750+ | $578,125+ | $578,100+ |
The Trump Tax Plan Increased the Standard Deduction
There are deductions to consider as well. The Trump tax plan nearly doubled the standard deduction for all filers. If you’re a single filer or if you’re married filing separately, your standard deduction for 2021 is $12,550. Joint filers have a deduction of $25,100 and heads of household get $18,800.
TAX YEAR 2024 STANDARD DEDUCTION
| Single Filers | Married Filing Jointly |
|---|---|
| $14,600 | $29,200 |
| TAX YEAR 2023 STANDARD DEDUCTION | |
| Single Filers | Married Filing Jointly |
| $13,850 | $27,700 |
Big Changes to State and Local Tax Deductions (SALT)
During initial talks, Republicans called for eliminating almost all itemized deductions, including state and local tax (SALT) deductions, but keeping those for charitable deductions and mortgage interest. Ultimately, the TCJA capped SALT deductions to $10,000 ($5,000 for married taxpayers filing separately).
Previously, taxpayers who itemized could deduct their state and local income, property and general sales tax payments on their federal tax returns. This was especially useful for residents of high-tax states like California and New Jersey.
Trump Tax Plan Changes to the Mortgage Interest Deduction
For the tax year 2017, homeowners who itemized their deductions could deduct their mortgage interest payments on mortgages up to $1 million. Starting in 2018, the limit on this deduction became $750,000. If you’re married and filing separately, your limit is $375,000 in mortgage interest.
Child Tax Credit Saw Big Changes
Under the Trump tax plan, the Child Tax Credit (CTC) increased to $2,000 per child under 17. The credit used to be $1,000. For tax year 2024, the first $1,700 of the credit is refundable. For tax year 2023, the first $1,600 is refundable.
Trump Tax Plan Doubles the Estate and Gift Tax Exemption
The federal estate tax, which ranges from 18% to 40%, applies when people with large estate transfer property to heirs. The Trump tax plan doubled the lifetime estate and gift tax exemption from the 2017 value of $5.49 million for individuals up to $11.18 million. This higher limit, which allows wealthy families to transfer more money tax-free to their heirs, has increased each year since.
While this lifetime exemption is indexed to inflation, it’s set to return to previous levels (but adjusted for inflation) after 2025. Here’s a look at the limits for tax years 2024 and 2023:
- 2024: $13.61 million
- 2023: $12.92 million
Trump Tax Plan Lowers Corporate Tax Rate
Before 2018, the corporate tax rate was 35%. The TCJA reduced the rate to 21%. This flat rate applies to all corporate income (of at least $1). The intent was to give corporations a financial break that would be passed on to the employees, and subsequently the economy.
Healthcare Mandate Change
Another impact of the passed plan was the elimination of the mandate for every adult to have health insurance. This was a key provision that was part of the American Care Act. The thought by many is that this could increase the premiums on insurance and drive taxes up for lower-income individuals down the road.
Bottom Line
The U.S. tax code isn’t always the most straightforward and things can get more confusing when there are changes from one year to the next. The Tax Cuts and Jobs Act made some big changes to the tax code, particularly to deductions and the tax brackets. Many of the changes in the tax plan are either eliminated or don’t take effect until after 2025, so the impact of these changes may not be seen for some time.
Tips for Filing Your Taxes
- A financial advisor can help optimize your tax strategy for your financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When the tax code changes, it’s a good idea to use a good tax filing service. We did our annual roundup of the best tax filing software so that you can get through this tax season as painlessly as possible.
- If you want to see whether you’ll get a tax refund or have to pay a tax bill, SmartAsset’s tax return calculator can help you plan ahead.
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