Last Updated 1 year ago
Many people feel that if the Tax Cuts and Jobs Act (TCJA), aka the Trump tax cuts, were to expire, everyone’s tax bill would go up. However, this is not necessarily the case, and in fact, there may be some taxpayers who would like TCJA not to be extended. Let’s look at who those taxpayers might be.
Taxpayers with Large Families: People may have forgotten that there used to be a tax deduction for each person in their family; those deductions were called personal tax exemptions. Before the TCJA, those exemptions were $4,050 per individual. Granted, the standard deduction did double for people, which would revert to its previous level, but families with many children would probably come out ahead.
Taxpayers that Live in States with High Income and Property Taxes: The TCJA limited the deduction for state and local taxes to $10,000. For example, a homeowner living and working in New York City lost significant tax deductions when his/her state, city, and property tax deductions were limited to $10,000. If this provision were to expire, many taxpayers would have significantly lower taxes.
Taxpayers with Business Losses: The TCJA changed these rules significantly, including eliminating the two-year carryback for most taxpayers, allowing Net Operation Losses (NOLs) to be carried forward indefinitely, but limiting the use of NOLs to 80% of taxable income in future years. Starting in 2026, taxpayers with significant business losses would have the above restrictions removed, allowing them to recover taxes from past years.
Here’s a final group of taxpayers who may have something to look forward to.
Owners of Corporations: The TCJA permanently reduced the federal corporate tax rate from a maximum of 35% to a flat 21%. On the campaign trail this year, President-Elect Trump proposed reducing corporate tax rates to as low as 15 percent — but only for corporations that make their products in the U.S.