Recently, a major piece of news has come from the United States, attracting the attention of countless people. The tax cuts introduced during the Trump era are about to expire, and if no action is taken, everyone's tax burden will collectively skyrocket starting in 2026! This is not a joke; it directly affects everyone's wallets.
The good news is that the new tax reform bill draft has been officially released, marking the first step forward. This tax reform is truly "the largest in history," with far-reaching impacts. Let's quickly see what it retains, what it eliminates, and who the biggest winners of this tax reform are!
Small Business Owners Rejoice: Section 199A Benefit Permanently Extended, Deduction Rate Increased!
For small business owners and the self-employed, Section 199A is definitely a great benefit. Simply put, it allows you to directly deduct a portion from your taxable income, reducing the actual tax amount paid.
Previously, this benefit was originally scheduled to expire at the end of this year, but the new tax reform draft not only extends this policy but also decides to make it permanent! Even more surprising is that the deduction rate has also increased from the original 20% to 23%.
What does this mean? For example, if you earn $200,000 a year, you could deduct $40,000 at the original 20%, and only pay taxes on the remaining $160,000. Now, with a 23% deduction, you can deduct $46,000 and only pay taxes on $154,000! Over the course of a year, you can save a few thousand more dollars, equivalent to earning the price of a used car!
Real Estate Investors' Gospel: Full Depreciation Makes a Comeback, Opportunity Zone Tax Incentives Return!
Bonus Depreciation, or full depreciation, is one of the favorite tax-saving tools for the wealthy. Simply put, it allows you to deduct the cost of purchased machinery, equipment, vehicles, and even aircraft in full in the first year, instead of depreciating them slowly over decades.
For real estate investors, this policy is like adding wings to a tiger. Earlier this year, a real estate project, through accelerated depreciation assessment and cost segregation, allowed investors with a $100,000 investment to expect a $200,000 tax deduction! Those with higher incomes can even save hundreds of thousands or millions in taxes.
Even better, this benefit was originally scheduled to have only a 40% deduction rate in 2025, but now the new bill directly restores it to 100% and extends it to 2029! This is simply too exciting!
In addition, the new tax law will also restore Opportunity Zones tax incentives, which were also originally scheduled to end in 2026, but are now extended to 2033.
Individual Income Tax: Universal Benefit for All Americans, Low Tax Rates Continue to Be Enjoyed!
Trump's tax reform in 2017 reduced individual income tax rates, such as the top rate dropping from 39.6% to 37%, and other levels also decreasing by 2% or 3% or so. However, the validity period of this policy is only 10 years, and it will expire at the end of this year.
Now, the good news is here! In the new tax bill, most of the individual income tax reduction clauses are proposed to be permanently effective, rather than just extended for another 10 years! Now, everyone no longer needs to worry about tax rates going back up and can continue to enjoy the benefits of low tax rates.
It is worth mentioning that this draft does not mention further reducing corporate income tax. After all, Trump has already cut the C Corp corporate income tax from 35% to 21% in one go in 2017, which is a large enough reduction.
Top Individual Income Tax Rate: The Wealthy's "Profit Concession" is Undecided, May Become a Bargaining Chip?
One of the more contentious points in this tax reform is whether the top individual income tax rate should be restored from 37% to 39.6%.
During the 2025 tax reform discussions, Trump's team originally hinted that they were considering restoring the top tax rate to 39.6%, and at the time, everyone thought Trump was going after the wealthy.
However, this item is not written into the newly announced tax bill, which means that the top tax rate in the current bill is still 37% and has not been increased.
Many people now speculate that this item is likely to become a bargaining chip in future congressional negotiations, and it is uncertain whether it will be added in the end. After all, the Democratic Party should not easily let go of this tax benefit that looks like a wealthy person's privilege.
However, the highest tax rate here will only affect the ultra-wealthy with an annual income of over $2.5 million.
Standard Deduction: A Boon for the Middle Class and Ordinary Workers, Real Tax Cuts!
The standard deduction is the amount the government allows you to directly deduct a portion of your income before paying taxes. You don't need to find invoices and receipts for this portion, and the government directly provides a standard value that applies to everyone, making it simple to operate.
Before the 2017 tax cut law, an individual could only deduct $6,350, and couples filing jointly could deduct $12,700. However, after the 2017 tax reform, the standard deduction amount was doubled. Currently, the standard deduction amount for married couples is $29,200, and the deduction amount for singles is $14,600.
But the validity period of this policy is also 10 years, and it will expire soon. In 2026, it will revert to only about half of the previous deduction amount, which will be $10,000 to $20,000 less.
However, the good news is that the new tax reform draft clearly states that the doubled standard will continue, and it will continue to be increased! The current proposal is to increase the standard deduction to $30,000 for couples filing jointly and $15,000 for singles.
This is a basic tax reduction benefit that is available to everyone, without requiring you to meet any special conditions. It is the most practical tax reduction policy, and it is definitely a major benefit, especially for low- and middle-income people.
SALT Deduction: High-Tax State Residents Expected to Reduce Burden, Limit Increased to $30,000!
The SALT deduction, also known as the federal deduction for state and local taxes, means that if you have already paid state taxes, should the federal government no longer tax this money?
For example, if you live in California and have an annual income of $200,000, and you pay $30,000 in state taxes, shouldn't this $30,000 already be taxed, and the federal government should deduct this portion when calculating income before calculating taxes?
In theory, yes, but there is a catch here. After the 2017 tax reform, the Trump administration added a limit, which is that this deduction can only be deducted up to $10,000. So, although you paid $30,000 in state taxes, you can only deduct $10,000 in federal taxes, and the remaining $20,000 in state taxes becomes a double taxation that you have already paid once and have to pay again.
Who is most affected by this rule? Of course, it is high-tax states like California, New York, and New Jersey, as well as middle-class people with middle-to-upper incomes and high property taxes, who are particularly disadvantaged.
In this new tax reform, the deduction limit has been raised from $10,000 to $30,000! Although the restriction has not been completely eliminated, it can at least allow more families to deduct an additional $20,000 in income and pay a few thousand dollars less in federal taxes.
However, many members of Congress from high-tax states such as California, New York, and New Jersey are now demanding that the limit be completely eliminated, otherwise, they will not support the entire bill. Because the state taxes in these states are too high, and deducting $10,000 or $30,000 is still too little; no limit is the best.
But for members of Congress from states that have no state taxes at all, such as Florida and Texas, this issue is not so important. So now there is a lot of controversy over this item, and it has not been finalized.
Child Tax Credit: Encouraging Childbirth, Credit Increased to $2,500 Per Child!
The current tax credit is $2,000 per child. Note that this is not a deduction, but a credit, which means that the cash amount is directly deducted from the taxes you are supposed to pay.
For example, if you were originally supposed to pay $15,000 in federal taxes, but you have two children, you would directly pay $4,000 less! It does not reduce your income, but directly reduces the taxes you have to pay.
Without the new tax law, this amount would automatically drop to only $1,000 in 2026, a reduction by half. But now, in the new bill, the child tax credit has been increased to $2,500 per child! That is to say, not only is the current credit amount of $2,000 retained, but an additional $500 is added! With two children, you can directly pay $5,000 less in taxes!
This is truly a practical measure to encourage childbirth!
Estate Tax: A Boon for the Wealthy to Pass on Wealth, Exemption Greatly Increased!
This relates to the inheritance of wealth and is the last tax defense line for high-net-worth families.
In 2025, the estate tax exemption for each US citizen is $13.99 million. Without a new tax reform, the estate tax exemption would drop to only about $7 million.
If a person passes away and leaves behind $15 million in family assets, only $7 million is tax-exempt, and the remaining $8 million is subject to estate tax. The US federal estate tax rate is progressive to a maximum of 40%, so you have to pay about $3 million to the federal government. Does it hurt?
This has a huge impact on those families and family companies that want to pass on assets to the next generation.
The good news is that the new bill proposes to greatly increase the exemption amount! Increase it to $15 million for one person and $30 million for two people! Of course, if you are a billionaire, you still have to pay, but for the vast majority of families, this exemption is enough to pass on wealth.
Tips and Overtime Income: Tax-Free Within Three Years, Salaried Workers Rejoice!
The newly announced tax reform draft stipulates that tip income and overtime wages will not be taxed before 2028! This mainly targets salaried workers with an annual income of no more than $160,000.
1099 Reporting Threshold: Save Time and Effort, No More Worries About Small Payments!
Previously, as long as you paid a contractor more than $600 in a year, you had to issue a 1099 form to report to the IRS. Now, this threshold has been raised to $2,000! Then you no longer need to submit a 1099 form for jobs under $2,000, which saves a lot of trouble.
New Tax Reform, Who are the Winners?
| Tax Reform Clause | Main Affected People | Level of Impact |
|---|---|---|
| 199A Benefit Permanently Extended | Small Business Owners, Self-Employed | Great Benefit |
| Full Depreciation Restored to 100% | Real Estate Investors | Great Benefit |
| Individual Income Tax Cuts Permanently Effective | All Americans | Universal Benefit |
| Standard Deduction Increased | Low- and Middle-Income People | Great Benefit |
| SALT Deduction Limit Increased to $30,000 | Middle Class in High-Tax States | Expected to Reduce Burden |
| Child Tax Credit Increased to $2,500 | Families with Children | Encouraging Childbirth |
| Estate Tax Exemption Greatly Increased | High-Net-Worth Families | Wealth Inheritance |
| Tips and Overtime Income Tax-Free | Salaried Workers with Annual Income Below $160,000 | Short-Term Benefit |
| 1099 Reporting Threshold Increased | Businesses, Employers | Reduce Tax Burden |
The Road to Tax Cuts is Long and Difficult
This draft has now passed the House Ways and Means Committee, which is the first hurdle in the legislative process. Next, it will be sent to the House of Representatives for a vote, and if it passes, it will be sent to the Senate, and finally to the President's desk for the President to sign before it can take effect.
The Republican Party's current goal is to get it done before the July 4th National Day, so that the new tax reform can officially take effect.
All in all, this tax reform includes both universal tax reduction measures and preferential policies for specific groups, which can be described as "everyone gets a share and gets what they need." Of course, whether the final plan can be successfully passed depends on the game between the two parties in Congress. Let's wait and see!