Finance Maxxing
Income Tax Basics
Tax Cuts and Jobs Act (TCJA)
2017 law that lowered rates and doubled the standard deduction.
The Tax Cuts and Jobs Act of 2017 was the most significant tax reform in over 30 years. Most individual provisions expire after 2025.
Key TCJA Changes
| Provision | Pre-TCJA | TCJA (2018–2025) |
|---|---|---|
| Top rate | 39.6% | 37% |
| Standard deduction (single) | ~$6,500 | ~$15,000 |
| Personal exemption | ~$4,150/person | Eliminated |
| SALT deduction | Unlimited | Capped at $10,000 |
| Mortgage interest | $1M limit | $750K limit |
| Child Tax Credit | $1,000 | $2,000 |
| Corporate rate | 35% | 21% (permanent) |
SALT Cap Update (2025)
The One Big Beautiful Bill Act raised the SALT cap to $40,000 for 2025, with a phase-out:
- Full $40,000 cap for MAGI up to $500,000
- Reduced by 30% of MAGI exceeding $500,000
- Reverts to $10,000 at approximately $600,000 MAGI
Sunset Provisions
Unless Congress acts, on January 1, 2026:
- Tax rates revert to pre-TCJA levels (top rate: 39.6%)
- Standard deduction drops roughly in half
- Personal exemptions return (~$5,000/person)
- SALT cap is removed (unlimited deduction)
- Many other provisions expire
Sources
Related Terms
More in Income Tax Basics
Tax Brackets
Progressive rate tiers applied to taxable income.
Marginal Tax Rate
The tax rate on your next dollar of income.
Effective Tax Rate
Your average tax rate across all income.
Taxable Income
Income remaining after deductions, subject to tax.
Adjusted Gross Income (AGI)
Gross income minus above-the-line deductions.
Modified Adjusted Gross Income (MAGI)
AGI with certain deductions added back, used for eligibility tests.
Filing Status
Determines your bracket thresholds and standard deduction.
Marriage Penalty & Bonus
Tax impact of filing jointly vs. two singles.