Prospective 2025 Tax Laws Explained: What It Means For Your Wallet -from Bigger Deductions to MAGA Savings Accounts
In a landmark budget bill narrowly passed by the House this week, Americans are facing some of the most significant tax changes since 2017. While the bill still awaits action in the Senate, the House version already offers a clear glimpse at how federal tax rules may shift starting in 2025 — and what that might mean for families, workers, and small business owners.
This article breaks down the major tax provisions of the bill, focusing on three main areas: extended tax cuts, the creation of MAGA (or “Trump”) Savings Accounts for children, and a major revision to the SALT deduction. Let’s walk through them in plain English.
1. Permanent Extension of the Trump-Era Tax Cuts
One of the core features of the bill is the permanent extension of the individual tax cuts originally passed in 2017 under the Tax Cuts and Jobs Act. Without Congressional action, those cuts were set to expire after 2025.
Here’s what stays under the new law:
– Lower Income Tax Brackets Stay in Place
– 20% Pass-Through Deduction Made Permanent for pass-through entities (Sole proprietorships, S corporations, Partnerships, Some LLCs)
– Standard Deduction Gets a Boost
– Child Tax Credit Raised (Temporarily)
– New Exemptions: Tips, Overtime Pay, and Car Loan Interest
2. MAGA (Trump) Savings Accounts: A New Option for Children
The bill introduces a brand-new type of government-backed tax shelter: the MAGA account, now officially called the Trump Savings Account.
Here’s how they work:
– Who Qualifies: Children born between January 1, 2024, and December 31, 2028
– How They’re Funded: $1,000 from federal government, up to $5,000/year from others
– How to Open One: Through approved financial institutions
– How the Money Grows: Invested in low-cost equity index funds, tax-deferred
– Withdrawals: Partial access at 18, full access by 30
– Tax Benefits: Growth taxed at long-term capital gains rates
3. SALT Deduction Cap Raised to Help High-Tax States
SALT stands for State and Local Taxes, and under current law, taxpayers can only deduct up to $10,000 in state and local tax payments from their federal return.
What’s changing:
– Cap raised to $40,000 for incomes under $500,000
– Deduction phases out gradually above $500,000
– Particularly beneficial for residents of high-tax states like CA, NY, NJ
What Does It All Mean?
For most taxpayers, this bill (if passed into law) means:
– Lower income taxes remain in place
– New deductions for tips, overtime, and auto loan interest
– More support for families through higher child tax credits (Current credit per child: $2,000, Increase through 2028: Temporarily boosted to $2,500 per child)Post-2028: Reverts to $2,000 per child, Refundable portion (the part you might get as a refund): Up to $1,700 in 2025
– A new way to save for kids’ futures with MAGA/Trump accounts
– Increased tax relief for people in high-tax states via the SALT deduction
As of today, the list of financial institutions offering this MAGA savings account have not been published.
Stay tuned for updates as the Senate reviews the bill.
Source: https://www.congress.gov/bill/119th-congress/house-bill/1/text
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