As we step into 2025, it’s crucial to stay informed about the tax breaks available across different income brackets and for businesses. This edition of “Financial Insights” will cover the tax breaks for the top one percent, middle class, and lower class, as well as those for businesses. We’ll also discuss the tax breaks that are set to expire and provide an outlook on the potential changes under a new presidential administration.

Tax Breaks for the Top One Percent

The top one percent of earners benefit from several tax breaks, including lower rates on capital gains and dividends, and various deductions and credits. The Tax Cuts and Jobs Act (TCJA) of 2017 significantly reduced the tax burden for high-income earners, with the top marginal tax rate dropping from 39.6% to 37%. However, many of these provisions are set to expire after 2025, potentially increasing the tax rates back to pre-TCJA levels2.

Tax Breaks for the Middle Class

Middle-class taxpayers have access to several tax breaks designed to ease their financial burden. These include the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and deductions for mortgage interest and state and local taxes (SALT). The TCJA also doubled the standard deduction, which has been beneficial for many middle-class families2. However, like the benefits for the top one percent, these provisions are also set to expire after 2025.

Tax Breaks for the Lower Class

Lower-income earners benefit from tax credits such as the EITC and the CTC, which can significantly reduce their tax liability. The American Rescue Plan Act (ARPA) temporarily expanded these credits, but these expansions are set to expire, potentially reducing the benefits available to lower-income families1.

Expiring Tax Breaks

Several key tax provisions are set to expire after 2025, including the lower individual income tax rates, the doubled standard deduction, and the expanded CTC. Unless Congress acts to extend these provisions, taxpayers could see higher tax rates and reduced deductions starting in 2025.

Tax Breaks for Businesses

Businesses can take advantage of various tax breaks, including deductions for salaries and wages, health insurance, and retirement plan contributions. The TCJA also introduced a 20% deduction for qualified business income, which has been beneficial for many small businesses2. However, this provision is also set to expire after 2025.

Outlook Under a New Presidential Administration

With the recent election of President Donald Trump for a second term, we can expect potential changes to the tax code. President Trump has proposed lowering the corporate tax rate from 21% to 20% and introducing new individual tax breaks, such as exempting Social Security payments from federal taxation. However, the exact details of these changes remain uncertain, and taxpayers should stay informed about potential legislative developments8.

In conclusion, staying informed about the available tax breaks and upcoming changes is crucial for effective financial planning. As we move forward, “Financial Insights” will continue to provide updates and guidance to help you navigate the evolving tax landscape.