Latest news with #BakerNewmanNoyes
NBC News
2 days ago
- Business
- NBC News
Trump's ‘big beautiful bill' includes these key tax changes for 2025 — what they mean for you
It's been about two weeks since President Donald Trump 's 'big beautiful bill' became law, and financial advisors and tax professionals are still digesting what the sweeping legislation means for clients. Meanwhile, several changes are effective for 2025, which will impact tax returns filed in 2026. While the Trump administration has been promoting ' working family tax cuts,' the legislation's impact depends on your unique situation — and some updates are complex, experts say. 'There are just so many moving pieces,' said certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a certified public accountant. Currently, many advisors are running projections — often for multiple years — to see how the new provisions could impact taxes. Without income planning, you could reduce, or even eliminate, various tax benefits for which you are otherwise eligible, experts say. When it comes to tax strategy, 'you never want to do anything in a silo,' Guarino said. Here are some of the key changes from Trump's legislation to know for 2025, and how the updates could affect your taxes. Trump's 2017 tax cut extensions The Republicans' marquee law made permanent Trump's 2017 tax cuts — including lower tax brackets and higher standard deductions, among other provisions — which broadly reduced taxes for Americans. Without the extension, most filers could have seen higher taxes in 2026, according to a 2024 report from the Tax Foundation. However, the new law enhances Trump's 2017 cuts, with a few tax breaks that start in 2025: The standard deduction increases from $15,000 to $15,750 (single filers) and $30,000 to $31,500 (married filing jointly). There is also a bump for the child tax credit, with the maximum benefit going from $2,000 to $2,200 per child. If you itemize tax breaks, there is also a temporary higher cap on the state and local tax deduction, or SALT. For 2025, the SALT deduction limit is $40,000, up from $10,000. The higher SALT benefit phases out, or reduces, for incomesbetween $500,000 to $600,000, which can create an artificially higher tax rate of 45.5% that some experts are calling a 'SALT torpedo.' This creates a 'sweet spot' for the SALT deduction between $200,000 and $500,000 of earnings, based on other provisions in the bill, CPA John McCarthy wrote in a blog post this week. Trump's new tax changes for 2025 Trump's tax and spending bill also introduced some temporary tax breaks, which are effective for 2025. Some of these were floated during his 2024 presidential provisions include a $6,000 'bonus' deduction for certain older Americans ages 65 and over, which phases out over $75,000 for single filers or $150,000 for married couples filing jointly. There are also new deductions for tip income, overtime earnings and car loan interest, with varying eligibility requirements. This chart shows a breakdown of some of the key individual provisions that are effective for 2025 compared to previous law. Premium tax credit 'subsidy cliff' returns During the pandemic, Congress boosted the premium tax credit through 2025, which made Marketplace health insurance more affordable. But Trump's legislation didn't extend the enhanced tax break, which could raise Affordable Care Act premiums for more than 22 million enrollees if no action is taken, according to KFF, a health policy organization. That could impact enrollees when choosing ACA health plans this fall, according to Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida. Starting in 2026, enrollees need to prepare for the ACA subsidy cliff, where enrollees lose the premium tax credit when income exceeds the earnings thresholds by even $1, he said. Currently, most ACA enrollees receive at least part of the premium tax credit. However, the subsidy cliff means enrollees lose the benefit once earnings exceed 400% of the federal poverty limit. For 2025, that threshold was $103,280 for a family of three, according to The Peterson Center on Healthcare, a nonprofit for healthcare policy, and KFF.
CNBC
2 days ago
- Business
- CNBC
Trump's ‘big beautiful bill' includes these key tax changes for 2025 — what they mean for you
It's been about two weeks since President Donald Trump's "big beautiful bill" became law, and financial advisors and tax professionals are still digesting what the sweeping legislation means for clients. Meanwhile, several changes are effective for 2025, which will impact tax returns filed in 2026. While the Trump administration has been promoting "working family tax cuts," the legislation's impact depends on your unique situation — and some updates are complex, experts say. "There are just so many moving pieces," said certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a certified public accountant. More from Personal Finance:Trump's 'big beautiful bill' caps student loans. What it means for youTax changes under Trump's 'big beautiful bill' — in one chartTrump's 'big beautiful bill' adds 45.5% 'SALT torpedo' for high earners Currently, many advisors are running projections — often for multiple years — to see how the new provisions could impact taxes. Without income planning, you could reduce, or even eliminate, various tax benefits for which you are otherwise eligible, experts say. When it comes to tax strategy, "you never want to do anything in a silo," Guarino said. Here are some of the key changes from Trump's legislation to know for 2025, and how the updates could affect your taxes. The Republicans' marquee law made permanent Trump's 2017 tax cuts — including lower tax brackets and higher standard deductions, among other provisions — which broadly reduced taxes for Americans. Without the extension, most filers could have seen higher taxes in 2026, according to a 2024 report from the Tax Foundation. However, the new law enhances Trump's 2017 cuts, with a few tax breaks that start in 2025: If you itemize tax breaks, there is also a temporary higher cap on the state and local tax deduction, or SALT. For 2025, the SALT deduction limit is $40,000, up from $10,000. The higher SALT benefit phases out, or reduces, for incomes between $500,000 to $600,000, which can create an artificially higher tax rate of 45.5% that some experts are calling a "SALT torpedo." This creates a "sweet spot" for the SALT deduction between $200,000 and $500,000 of earnings, based on other provisions in the bill, CPA John McCarthy wrote in a blog post this week. Trump's tax and spending bill also introduced some temporary tax breaks, which are effective for 2025. Some of these were floated during his 2024 presidential provisions include a $6,000 "bonus" deduction for certain older Americans ages 65 and over, which phases out over $75,000 for single filers or $150,000 for married couples filing jointly. There are also new deductions for tip income, overtime earnings and car loan interest, with varying eligibility requirements. This chart shows a breakdown of some of the key individual provisions that are effective for 2025 compared to previous law. During the pandemic, Congress boosted the premium tax credit through 2025, which made Marketplace health insurance more affordable. But Trump's legislation didn't extend the enhanced tax break, which could raise Affordable Care Act premiums for more than 22 million enrollees if no action is taken, according to KFF, a health policy organization. That could impact enrollees when choosing ACA health plans this fall, according to Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida. Starting in 2026, enrollees need to prepare for the ACA subsidy cliff, where enrollees lose the premium tax credit when income exceeds the earnings thresholds by even $1, he said. Currently, most ACA enrollees receive at least part of the premium tax credit. However, the subsidy cliff means enrollees lose the benefit once earnings exceed 400% of the federal poverty limit. For 2025, that threshold was $103,280 for a family of three, according to The Peterson Center on Healthcare, a nonprofit for healthcare policy, and KFF.
NBC News
11-07-2025
- Business
- NBC News
Trump's 'big beautiful bill' could deliver 45.5% 'SALT torpedo' for high earners, tax pro says
President Donald Trump 's 'big beautiful bill' delivers a temporary higher limit on the federal deduction for state and local taxes, known as SALT. But the phaseout, or income-based benefit reduction, could trigger a tax surprise for some higher earners, experts say. If you itemize tax breaks, you can claim the SALT deduction, which includes state and local income taxes and property taxes. Trump's legislation raises the SALT deduction limit to $40,000 starting in 2025, with a 1% yearly increase through 2029, before reverting to $10,000 in 2030. However, the $40,000 SALT cap starts to phase out once modified adjusted gross income, or MAGI, exceeds $500,000. The SALT limit drops to $10,000 once MAGI reaches $600,000. MAGI is adjusted gross income with some tax breaks added back in. This phaseout can create a 'SALT torpedo' — an artificially high tax rate — when MAGI falls between $500,000 and $600,000, certified public accountant Jeff Levine said in a LinkedIn post this week. In some cases, you could pay a 45.5% federal tax rate on earnings between those thresholds, experts say. Here's how the 'SALT torpedo' works and who could be impacted, according to tax experts. How the SALT deduction phaseout works Under Trump's legislation, the SALT deduction limit for 2025 is now $30,000 higher. But a 30% phaseout kicks in once MAGI exceeds $500,000 for 2025. Between $500,000 and $600,000, 'you're losing 30% for every dollar' of benefit between those thresholds, said certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a CPA. At $600,000, if you multiply the extra $100,000 of income by 30%, that's a $30,000 benefit reduction, which drops the $40,000 SALT cap back to $10,000. A 'quirky' phaseout boosts tax rate With the 30% SALT deduction phaseout between $500,000 and $600,000 of MAGI, some individuals could pay a higher-than-expected tax on earnings between those thresholds, according to Robert Keebler, a CPA with tax advisory firm Keebler & Associates in Green Bay, Wisconsin. Between $500,000 and $600,000, you're increasing taxable income while losing part of the SALT deduction, which raises your effective tax rate — the percent of taxable income you pay. If taxable income rises while the SALT deduction falls, your effective tax rate on income between $500,000 and $600,000 could far exceed your regular income tax rate, Keebler said in a LinkedIn post last week. 'It's definitely a quirky little phaseout provision,' Andy Whitehair, a CPA and a director with Baker Tilly's Washington tax council practice, told CNBC. 'When people start actually crunching numbers, they might be in for some surprises.' Whitehair also shared a basic example of the phaseout on LinkedIn this week. If your income is $500,000 and you subtract $75,000 of itemized deductions (including $40,000 for SALT), your taxable income is $425,000. By contrast, $600,000 of income would drop the SALT deduction to $10,000, which reduces itemized deductions to $45,000, and raises taxable income to $555,000. When comparing taxable income for each example, the true difference is $130,000 with the $30,000 lost SALT deduction. If you multiply that by the 35% tax bracket, you get $45,500. In this simplified example, there is $45,500 more federal tax owed by earning $100,000 more, which is 45.5%, Whitehair said. If your 2025 earnings could be near $500,000, you should run projections with a tax advisor and weigh strategies to reduce MAGI, experts say. With the steep tax penalty between $500,000 and $600,000, you may reconsider Roth individual retirement conversions, incurring large capital gains or other moves that could boost your income, according to Keebler.
CNBC
11-07-2025
- Business
- CNBC
Trump's ‘big beautiful bill' could deliver 45.5% ‘SALT torpedo' for high earners, tax pro says
President Donald Trump's 'big beautiful bill' delivers a temporary higher limit on the federal deduction for state and local taxes, known as SALT. But the phaseout, or income-based benefit reduction, could trigger a tax surprise for some higher earners, experts say. If you itemize tax breaks, you can claim the SALT deduction, which includes state and local income taxes and property taxes. Trump's legislation raises the SALT deduction limit to $40,000 starting in 2025, with a 1% yearly increase through 2029, before reverting to $10,000 in 2030. However, the $40,000 SALT cap starts to phase out once modified adjusted gross income, or MAGI, exceeds $500,000. The SALT limit drops to $10,000 once MAGI reaches $600,000. MAGI is adjusted gross income with some tax breaks added back in. This phaseout can create a "SALT torpedo" — an artificially high tax rate — when MAGI falls between $500,000 and $600,000, certified public accountant Jeff Levine said in a LinkedIn post this week. In some cases, you could pay a 45.5% federal tax rate on earnings between those thresholds, experts say. More from Personal Finance:Tax changes under Trump's 'big beautiful bill' — in one chart'YOLO'-buying EVs: As $7,500 tax credit ends, consumers may rush to cash inTrump's 'big beautiful bill' cuts SNAP for millions of families: Report Here's how the "SALT torpedo" works and who could be impacted, according to tax experts. Under Trump's legislation, the SALT deduction limit for 2025 is now $30,000 higher. But a 30% phaseout kicks in once MAGI exceeds $500,000 for 2025. Between $500,000 and $600,000, "you're losing 30% for every dollar" of benefit between those thresholds, said certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a CPA. At $600,000, if you multiply the extra $100,000 of income by 30%, that's a $30,000 benefit reduction, which drops the $40,000 SALT cap back to $10,000. With the 30% SALT deduction phaseout between $500,000 and $600,000 MAGI, some individuals could pay higher-than-expected tax on earnings between those thresholds, according to Robert Keebler, a CPA with tax advisory firm Keebler & Associates in Green Bay, Wisconsin. Between $500,000 to $600,000, you're increasing taxable income while losing part of the SALT deduction, which raises your effective tax rate — the percent of taxable income you pay. If taxable income rises while the SALT deduction falls, your effective tax rate on income between $500,000 to $600,000 could far exceed your regular income tax rate, Keebler said in a LinkedIn post last week. "It's definitely a quirky little phaseout provision," Andy Whitehair, a CPA and a director with Baker Tilly's Washington tax council practice, told CNBC. "When people start actually crunching numbers, they might be in for some surprises." Whitehair also shared a basic example of the phaseout on LinkedIn this week. If your income is $500,000 and you subtract $75,000 of itemized deductions (including $40,000 for SALT), your taxable income is $425,000. By contrast, $600,000 of income would drop the SALT deduction to $10,000, which reduces itemized deductions to $45,000, and raises taxable income to $555,000. In this simplified example, there is $45,500 more federal tax owed by earning $100,000 more, which is 45.5%, Whitehair said. If your 2025 earnings could be near $500,000, you should run projections with a tax advisor and weigh strategies to reduce MAGI, experts say. With the steep tax penalty between $500,000 and $600,000, you may reconsider Roth individual retirement conversions, incurring large capital gains or other moves that could boost your income, according to Keebler.
