Who Benefits From Trumps Tax Plan?

The Tax Cuts and Jobs Act (TCJA) of 2017 was a major overhaul of the U.S. tax code, introducing widespread changes for individuals and businesses. Signed into law by President Donald Trump, the legislation aimed to stimulate economic activity by lowering tax rates and simplifying the tax code. The law’s goals included making American corporations more competitive globally and providing tax relief to families and workers.

The TCJA permanently altered the corporate tax structure while enacting temporary changes for individual taxpayers, many of which are scheduled to expire at the end of 2025. The law’s passage required that many individual provisions would sunset to comply with budgetary rules. Its broad scope touched nearly every part of the tax system, from income tax brackets and deductions to international tax rules and estate planning.

Impact on Individuals and Families

The TCJA introduced substantial modifications for individuals and families, primarily through adjustments to tax rates and deductions. The law retained the seven-bracket structure but lowered the rates for most income levels. For instance, the top marginal rate was reduced from 39.6% to 37%, and other brackets saw reductions of one to four percentage points, providing a direct tax cut for many filers.

A central change was the near-doubling of the standard deduction, which increased to $12,000 for single filers and $24,000 for married couples filing jointly in 2018. This simplified tax filing for many, as fewer taxpayers needed to itemize deductions. This change was coupled with the elimination of the personal exemption, a $4,050 deduction per taxpayer, spouse, and dependent. This trade-off meant that some households, particularly larger families, may not have seen a net tax reduction, as the loss of personal exemptions could outweigh the higher standard deduction.

The TCJA also expanded the Child Tax Credit (CTC), doubling the maximum credit to $2,000 per qualifying child. A portion of this credit, up to $1,700 for 2025, was made refundable, meaning families could receive it even if they owed no income tax. The law also increased the income phase-out thresholds to $200,000 for single parents and $400,000 for married couples, extending the credit’s benefits to more middle- and upper-middle-income families.

A contentious provision was the new cap on the state and local tax (SALT) deduction. The TCJA capped the amount of state and local income, sales, and property taxes that itemizing taxpayers could deduct at $10,000 per household. This limitation primarily affected taxpayers in states with high income and property taxes. For these individuals, the cap could increase their federal tax liability compared to the prior law.

The majority of these individual tax provisions are not permanent. The lower tax rates, higher standard deduction, expanded child tax credit, and the SALT cap are all scheduled to expire at the end of 2025. Without further congressional action, the individual tax code will revert to its pre-TCJA state.

Impact on Corporations

A permanent change introduced by the TCJA was the reduction of the federal corporate income tax rate. The law replaced the previous graduated rate structure, which topped out at 35%, with a flat 21% rate for C-corporations. This cut was designed to increase the competitiveness of U.S. businesses, aligning the nation’s corporate tax rate more closely with other developed countries and providing a direct benefit to profitable corporations.

The act also shifted how the U.S. taxes the foreign profits of multinational corporations, moving from a “worldwide” system to a “quasi-territorial” one. Previously, U.S. companies were taxed on global income but could defer U.S. tax on foreign profits until repatriated. To transition, the TCJA imposed a one-time repatriation tax on accumulated overseas profits, taxing cash at 15.5% and non-cash assets at 8%. These lower rates encouraged companies to bring foreign earnings back to the United States.

To incentivize business investment, the TCJA introduced 100% bonus depreciation. This allowed businesses to immediately deduct the full cost of certain capital investments, like equipment and machinery, in the year of purchase. This immediate expensing provided a cash-flow benefit to companies making substantial capital expenditures. This provision is temporary and has been phasing down, with the rate for 2025 set at 40%.

Impact on Pass-Through Businesses

The TCJA created a new tax benefit for pass-through businesses, such as sole proprietorships, partnerships, S-corporations, and LLCs. Unlike C-corporations, these entities do not pay taxes at the business level; instead, profits “pass-through” to the owners, who report the income on their individual tax returns. The law introduced the Section 199A deduction, or Qualified Business Income (QBI) deduction, for these businesses.

The QBI deduction allows eligible owners to deduct up to 20% of their qualified business income. This deduction reduces a taxpayer’s taxable income but not their adjusted gross income. For an owner in the top 37% tax bracket, this could lower their effective marginal tax rate on that business income to 29.6%. The deduction is available to taxpayers whether they take the standard deduction or itemize.

Eligibility for the full 20% deduction depends on the taxpayer’s income. For 2025, taxpayers with taxable income below $197,300 for single filers and $394,600 for joint filers can claim the full deduction. Above these thresholds, limitations based on factors like W-2 wages paid and the basis of qualified property can reduce the deductible amount.

A restriction within the QBI rules applies to “specified service trades or businesses” (SSTBs), such as those in health, law, and consulting. For these SSTBs, the QBI deduction is phased out for owners with taxable incomes between $197,300 and $247,300 for single filers in 2025. It is eliminated for those with incomes above that range. This exclusion was designed to target the benefit toward businesses with more capital and employee investment.

Impact on High-Net-Worth Individuals and Estates

The TCJA included provisions that benefited high-net-worth individuals, particularly regarding estate taxes and the Alternative Minimum Tax. These changes targeted a smaller, wealthier segment of the population. The most direct benefit came from the doubling of the federal estate tax exemption.

The TCJA increased the federal estate tax exemption base to $10 million, indexed for inflation, raising it to $13.99 million per person by 2025. This means a married couple could pass on nearly $28 million to their heirs without incurring any federal estate or gift tax. This change reduced the number of estates subject to the 40% top estate tax rate, benefiting the wealthiest households.

The law also curtailed the reach of the individual Alternative Minimum Tax (AMT), a parallel tax system designed to ensure high-income individuals pay a minimum amount of tax. The TCJA increased the AMT exemption amounts and the income levels at which those exemptions begin to phase out. For example, the exemption phase-out threshold for joint filers jumped to $1,000,000. This change meant many taxpayers, particularly in the upper-middle and high-income brackets who were previously caught by the AMT, were no longer subject to it.