Latest news with #OBBA
USA Today
7 hours ago
- Business
- USA Today
Two-income retired couple may lose $18,100 annually in Social Security in 2033
A dual-earning couple retiring at the start of 2033 can expect an average $18,100 lower annual Social Security benefit than if they retired now, according to a new analysis from the Committee for a Responsible Federal Budget. The 24% drop is expected to come just after Social Security's Old-Age and Survivors Insurance (OASI) Trust Fund is depleted. OASI holds money collected from payroll taxes to help fund Social Security. That fund is expected to be depleted by late 2032 as the number of retired people outpaces the number of workers. Once OASI's depleted, Social Security benefits will no longer be paid at the full rate. Instead, benefits will be cut, only payable by the amount of money coming in. Even worse, "the cuts would grow over time as scheduled benefits continue to outpace dedicated revenues," the nonprofit CRFB said in its analysis. By 2099, the size of the required benefit cut would grow to well over 30%, it said. Here's how cuts could affect Americans The $18,100 annual cut is an average for a two-income couple. Depending on a couple's age, marital status, and work history, the actual size of the benefit cut would vary. Here are some examples of how Americans could be affected, in nominal or non-inflation adjusted terms, CRFB said: How many Americans could be affected? In June, nearly 67 million Americans received Social Security, according to the Social Security Administration. Social Security is deemed important by 96% of Americans in 2025, with little difference among age groups and political party affiliation, an AARP survey of 3,599 adults ages 18 and older taken last month showed. AARP is a nonprofit advocating for older Americans. Nearly two in three retired Americans say they rely substantially on Social Security, while another 21% say they rely on it somewhat, AARP said. CRFB vs Social Security and Medicare Trustees The CRFB's estimates of a 24% cut in seven years is more dire than the 23% drop in eight years provided by the Social Security and Medicare Trustees report in June. That's because CRFB accounts for the impact from the One Big Beautiful Bill Act (OBBA) signed into law over the Fourth of July, the think tank said. "The tax rate cuts and increase in the senior standard deduction from the recently enacted OBBBA would reduce Social Security's revenue from the income taxation of benefits, increasing the required cut by about a percentage point upon insolvency," CRFB said. "If the expanded senior standard deduction and other temporary measures of OBBBA are made permanent, the benefit cut would grow larger." The OBBBA's $6,000 extra senior deduction is slated for 2025 through 2028. What can government do to keep 100% benefits flowing? Congress will have to increase revenue coming into the program by possibly raising payroll taxes, reducing overall spending on benefits maybe by raising the full retirement age, or some combination of the two, AARP suggested. Also, eliminating the maximum income that's taxable for payroll tax and reducing the benefits paid on higher earnings are also among steps Congress could take to save money, the CRFB said. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
Yahoo
a day ago
- Business
- Yahoo
What Trump's New Tax Law Means for Upper-Middle-Class Families in 2025
President Trump signed his 'One Big Beautiful Act' (OBBA) into law and Americans will see sweeping changes to their finances as a result. The final bill includes a senior bonus to help offset Social Security taxes, tax breaks for service industry employees, a bigger Child Tax Credit, but will also make Trump's Tax Cuts and Jobs Act of 2017 (TCJA) permanent and cut funding for Medicaid and Medicare, per the Center for American Progress. Read Next: For You: While the bill has been touted as a way to offer financial relief to Americans, it doesn't exactly give much help. 'This thing is mostly smoke and mirrors for upper middle class families (that $117,000 to $150,000 range),' said finance expert Andrew Lokenauth with Be Fluent in Finance. 'You're not getting hammered, but you're not winning either.' Here's what Trump's new tax law really means for the upper-middle class, according to tax and finance experts. Increased Standard Deduction The standard deduction is rising to $15,000 for single filers, an increase of $400 and $30,000 for married couples, which is an increase of $800 per the IRS.'This is a big win for families in this income bracket who don't itemize deductions,' said Peter Diamond, a federally licensed tax, accounting, real estate and structure and certified bankability expert.'Most upper middle class taxpayers don't exceed the itemization threshold, especially with the SALT (state and local taxes) cap still in place. The increased standard deduction gives them a bigger automatic write-off, reducing taxable income and simplifying filing,' he according to Lokenauth, that change could cost some taxpayers more. 'If you're in that $120,000 to $150,000 income zone, especially with a mortgage, the loss of personal exemptions and caps on SALT means you're probably paying more now than you did before 2018,' he added. Check Out: Expanded Child Tax Credit The Child Tax Credit was a big talking point for Trump and Vice President Vance. The credit boosted from $2,000 per qualifying child to $2,220 beginning in 2026, per CNBC. Parents must earn $200,000 a year or less or joint filers up to $400,000. 'That means many families in the $117,000 to $150,000 range, who were previously phased out of this credit, now qualify again,' Diamond said. 'For a family with two children, that's up to $4,000 in tax credits, which directly reduces the tax bill dollar-for-dollar.'However, the new revisions are not as good as they seem, Lokenauth said. 'We got the credit — but the alternative minimum tax (AMT) and phaseouts on other things like education credits basically neutralized any real benefit,' he explained. 'The math got messier, not cleaner.' SALT Deduction Cap Remains While there are ways the upper middle class can get a small break, the State and Local Tax deduction cap will not offer relief, according to Diamond. 'The $10,000 cap remains, which hits high-tax states hard,' he said. 'Families in this income range often pay well over $10,000 in combined property and state income taxes, but they can only deduct up to that cap. While some benefits elsewhere may offset this, it's still a frustrating limitation for many.' Mortgage Interest Deduction Previously under the TCJA you could deduct mortgage interest up to $1 million in debt, but it's now been reduced to $750,000. 'For a lot of upper middle class buyers in expensive housing markets (California, D.C. suburbs, New York burbs), this wipes out a big deduction you probably relied on,' Lokenauth explained.'A friend who bought in Westchester with a $900K mortgage was shocked to learn that only a portion of his interest was deductible. He said it cost him over $3,000 in missed tax savings in his first year alone,' he added. 20% QBI Deduction Extended The Qualified Business Income (QBI) deduction — allowing up to a 20% deduction on pass-through business income — has been extended.'This doesn't help W-2 earners, but for anyone in this income range with a side business, real estate rentals or 1099 income, it's a powerful tool. Structuring income the right way could significantly lower their taxable income,' Diamond an upper middle class income sounds great on paper, but it's not the comfortable salary needed to live after taxes and cost of living.'If you're making around $125,000, you're probably seeing some benefit from the current system — lower marginal rates, bigger standard deduction — but you're also losing more in deductions. Especially if you own a home or pay a lot in local taxes,' Lokenauth knowing the tax codes is beneficial and can work to your advantage, Diamond explained. 'The truth is, wage earners will always pay the most in taxes, while asset owners often pay the least. That's how the system is designed — but when you understand the code, you can use it to your advantage instead of being crushed by it,' he added. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on This article originally appeared on What Trump's New Tax Law Means for Upper-Middle-Class Families in 2025
Yahoo
2 days ago
- Business
- Yahoo
What Trump's New Tax Law Means for Upper-Middle-Class Families in 2025
President Trump signed his 'One Big Beautiful Act' (OBBA) into law and Americans will see sweeping changes to their finances as a result. The final bill includes a senior bonus to help offset Social Security taxes, tax breaks for service industry employees, a bigger Child Tax Credit, but will also make Trump's Tax Cuts and Jobs Act of 2017 (TCJA) permanent and cut funding for Medicaid and Medicare, per the Center for American Progress. Read Next: For You: While the bill has been touted as a way to offer financial relief to Americans, it doesn't exactly give much help. 'This thing is mostly smoke and mirrors for upper middle class families (that $117,000 to $150,000 range),' said finance expert Andrew Lokenauth with Be Fluent in Finance. 'You're not getting hammered, but you're not winning either.' Here's what Trump's new tax law really means for the upper-middle class, according to tax and finance experts. Increased Standard Deduction The standard deduction is rising to $15,000 for single filers, an increase of $400 and $30,000 for married couples, which is an increase of $800 per the IRS.'This is a big win for families in this income bracket who don't itemize deductions,' said Peter Diamond, a federally licensed tax, accounting, real estate and structure and certified bankability expert.'Most upper middle class taxpayers don't exceed the itemization threshold, especially with the SALT (state and local taxes) cap still in place. The increased standard deduction gives them a bigger automatic write-off, reducing taxable income and simplifying filing,' he according to Lokenauth, that change could cost some taxpayers more. 'If you're in that $120,000 to $150,000 income zone, especially with a mortgage, the loss of personal exemptions and caps on SALT means you're probably paying more now than you did before 2018,' he added. Check Out: Expanded Child Tax Credit The Child Tax Credit was a big talking point for Trump and Vice President Vance. The credit boosted from $2,000 per qualifying child to $2,220 beginning in 2026, per CNBC. Parents must earn $200,000 a year or less or joint filers up to $400,000. 'That means many families in the $117,000 to $150,000 range, who were previously phased out of this credit, now qualify again,' Diamond said. 'For a family with two children, that's up to $4,000 in tax credits, which directly reduces the tax bill dollar-for-dollar.'However, the new revisions are not as good as they seem, Lokenauth said. 'We got the credit — but the alternative minimum tax (AMT) and phaseouts on other things like education credits basically neutralized any real benefit,' he explained. 'The math got messier, not cleaner.' SALT Deduction Cap Remains While there are ways the upper middle class can get a small break, the State and Local Tax deduction cap will not offer relief, according to Diamond. 'The $10,000 cap remains, which hits high-tax states hard,' he said. 'Families in this income range often pay well over $10,000 in combined property and state income taxes, but they can only deduct up to that cap. While some benefits elsewhere may offset this, it's still a frustrating limitation for many.' Mortgage Interest Deduction Previously under the TCJA you could deduct mortgage interest up to $1 million in debt, but it's now been reduced to $750,000. 'For a lot of upper middle class buyers in expensive housing markets (California, D.C. suburbs, New York burbs), this wipes out a big deduction you probably relied on,' Lokenauth explained.'A friend who bought in Westchester with a $900K mortgage was shocked to learn that only a portion of his interest was deductible. He said it cost him over $3,000 in missed tax savings in his first year alone,' he added. 20% QBI Deduction Extended The Qualified Business Income (QBI) deduction — allowing up to a 20% deduction on pass-through business income — has been extended.'This doesn't help W-2 earners, but for anyone in this income range with a side business, real estate rentals or 1099 income, it's a powerful tool. Structuring income the right way could significantly lower their taxable income,' Diamond an upper middle class income sounds great on paper, but it's not the comfortable salary needed to live after taxes and cost of living.'If you're making around $125,000, you're probably seeing some benefit from the current system — lower marginal rates, bigger standard deduction — but you're also losing more in deductions. Especially if you own a home or pay a lot in local taxes,' Lokenauth knowing the tax codes is beneficial and can work to your advantage, Diamond explained. 'The truth is, wage earners will always pay the most in taxes, while asset owners often pay the least. That's how the system is designed — but when you understand the code, you can use it to your advantage instead of being crushed by it,' he added. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on This article originally appeared on What Trump's New Tax Law Means for Upper-Middle-Class Families in 2025
Yahoo
4 days ago
- Business
- Yahoo
New tax law increases big beyond-the-grave tax break for the wealthy
The US federal estate tax has come a long way since 2000, when the exemption level was set at $675,000. The amount has increased greatly over the past quarter century. Americans who die in 2025 may leave behind tax free to their heirs up to $13.99 million. That exemption level had been set to expire after this year and snap back to a little more than $7 million per person. But that won't happen. Instead, starting in 2026, the exemption level will increase by roughly 7.2% to $15 million and adjust for inflation every year thereafter. That's courtesy of the One Big Beautiful Act that Republicans pushed through in time for President Donald Trump to sign it into law on his self-appointed deadline of July 4. Keep in mind, while not new, the exemption level is effectively doubled for married couples. That's because any unused exemption from the first spouse who dies can be passed to the surviving spouse, and the decedent's estate can pass to the widow or widower tax free. Then, when they die, they will get up to two times the individual exemption level. So that comes to $27.98 million tax free for couples this year and $30 million next year. (It's also worth noting that the estate tax exemption level is the same as the lifetime gift tax exemption level. That means essentially how much you're allowed to exempt from estate taxes at death is reduced by how much you gave away in gifts while you were alive.) The OBBA did not change the federal tax rates imposed on the taxable portion of estates. They're set on a graduated scale, from 18% to 40% with the initial portion above the exemption level taxed at 18%, the next portion at 20% and so on up to 40%, which is well below the 55% top rate that applied in 2001. How many estates are affected? Raising the exemption level to $15 million a person is likely to further reduce the already low share of estates subject to the estate tax. In 2001, roughly 2.1% of Americans who died left behind taxable estates — and that number dropped to just 0.07% in 2019, according to the Congressional Research Service. That share was expected to rise to 0.2% in 2026, had the exemption level snapped back to roughly $7 million as was scheduled. Despite those very tiny percentages, the Joint Committee on Taxation estimates that the OBBA change will reduce federal revenue by nearly $212 billion over the next decade relative to what the law had called for before OBBA was enacted. Don't forget about your state Even if your estate or that of a loved one falls well below the federal exemption level, the estate may still be considered taxable in the state where a decedent was living when they died. As of this year, 12 states and the District of Columbia have an estate tax, according to the Tax Foundation. The states are: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. The exemption levels and the tax rates imposed vary from state to state. In Massachusetts, for example, the exemption level is $2 million, and depending how much more an estate is worth above that threshold, it may be subject to a tax rate between 0.8% and 16%. In Washington, up to $3 million may be exempt from the state estate tax but rates run as high as 35% on the taxable portion of an estate.
CNN
4 days ago
- Business
- CNN
New tax law increases big beyond-the-grave tax break for the wealthy
The US federal estate tax has come a long way since 2000, when the exemption level was set at $675,000. The amount has increased greatly over the past quarter century. Americans who die in 2025 may leave behind tax free to their heirs up to $13.99 million. That exemption level had been set to expire after this year and snap back to a little more than $7 million per person. But that won't happen. Instead, starting in 2026, the exemption level will increase by roughly 7.2% to $15 million and adjust for inflation every year thereafter. That's courtesy of the One Big Beautiful Act that Republicans pushed through in time for President Donald Trump to sign it into law on his self-appointed deadline of July 4. Keep in mind, while not new, the exemption level is effectively doubled for married couples. That's because any unused exemption from the first spouse who dies can be passed to the surviving spouse, and the decedent's estate can pass to the widow or widower tax free. Then, when they die, they will get up to two times the individual exemption level. So that comes to $27.98 million tax free for couples this year and $30 million next year. (It's also worth noting that the estate tax exemption level is the same as the lifetime gift tax exemption level. That means essentially how much you're allowed to exempt from estate taxes at death is reduced by how much you gave away in gifts while you were alive.) The OBBA did not change the federal tax rates imposed on the taxable portion of estates. They're set on a graduated scale, from 18% to 40% with the initial portion above the exemption level taxed at 18%, the next portion at 20% and so on up to 40%, which is well below the 55% top rate that applied in 2001. Raising the exemption level to $15 million a person is likely to further reduce the already low share of estates subject to the estate tax. In 2001, roughly 2.1% of Americans who died left behind taxable estates — and that number dropped to just 0.07% in 2019, according to the Congressional Research Service. That share was expected to rise to 0.2% in 2026, had the exemption level snapped back to roughly $7 million as was scheduled. Despite those very tiny percentages, the Joint Committee on Taxation estimates that the OBBA change will reduce federal revenue by nearly $212 billion over the next decade relative to what the law had called for before OBBA was enacted. Even if your estate or that of a loved one falls well below the federal exemption level, the estate may still be considered taxable in the state where a decedent was living when they died. As of this year, 12 states and the District of Columbia have an estate tax, according to the Tax Foundation. The states are: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. The exemption levels and the tax rates imposed vary from state to state. In Massachusetts, for example, the exemption level is $2 million, and depending how much more an estate is worth above that threshold, it may be subject to a tax rate between 0.8% and 16%. In Washington, up to $3 million may be exempt from the state estate tax but rates run as high as 35% on the taxable portion of an estate.
