Adjusted Tax Brackets in Big Beautiful Bill

[stepitup]

With the passage of the Senate's version by both houses and the all-but-guaranteed signing by Trump, I've been trying to get a handle on how the bill will effect my personal taxes for 2025.

The best summary I found was from the Tax Foundation at https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/

They mention that the 10, 12, and 22 percent brackets will have their inflation adjustments increased by an extra year. My understanding is that means that they will apply the index factor again to the 2025 brackets making them slightly wider. Is that correct? Does anyone know more specifically what factor they'll use and/or what the ending brackets will be?

[seattlecyclone]

Okay...so...

Section 1(j) of the tax code defines the tax brackets that we've been using since 2018. Paragraph 3 of that section defines the inflation adjustments that will be applied to these tax brackets.

This in turn refers back to the method of adjusting the previous set of tax brackets for inflation (paragraphs 1 and 2 of Section 1(f)), which basically says to scale up the dollar amounts specified in the law by the amount of inflation (C-CPI-U inflation to be exact) since 2016...

...except that Section 1(j)(3)(B)(i) says that the inflation adjustments for these 2018-present tax brackets are to scale up for inflation since 2017 instead of 2016.

Now this bill further amends Section 1(j)(3)(b)(i) so that the switch from 2016 to 2017 is to be used "solely for purposes of determining the dollar amounts at which any rate bracket higher than 12 percent ends and at which any rate bracket higher than 22 percent begins."

Crystal clear so far?

My interpretation (which seems to agree with the summary you linked to) is that the lower brackets are now going to be redefined in terms of 2016 dollars instead of 2017 dollars, so we'll get an extra ~2% boost to the boundaries between these brackets for next year. Such a strange rule.

[stepitup]

Thanks a bunch for taking the time to reply.

I still haven't seen much about this aspect reported so I think it's flying under the radar. Or maybe it's just not that big of a deal to people to mention.

I'm also thinking it might not take effect until the 2026 brackets but I guess I'll just wait and see at this point.

[mistymoney]

With the passage of the Senate's version by both houses and the all-but-guaranteed signing by Trump, I've been trying to get a handle on how the bill will effect my personal taxes for 2025.

The best summary I found was from the Tax Foundation at https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/

They mention that the 10, 12, and 22 percent brackets will have their inflation adjustments increased by an extra year. My understanding is that means that they will apply the index factor again to the 2025 brackets making them slightly wider. Is that correct? Does anyone know more specifically what factor they'll use and/or what the ending brackets will be?

haven't the tax brackets been set for 2025, and this bill is for 2026 and forward?

[Sandi_k]

With the passage of the Senate's version by both houses and the all-but-guaranteed signing by Trump, I've been trying to get a handle on how the bill will effect my personal taxes for 2025.

The best summary I found was from the Tax Foundation at https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/

They mention that the 10, 12, and 22 percent brackets will have their inflation adjustments increased by an extra year. My understanding is that means that they will apply the index factor again to the 2025 brackets making them slightly wider. Is that correct? Does anyone know more specifically what factor they'll use and/or what the ending brackets will be?

haven't the tax brackets been set for 2025, and this bill is for 2026 and forward?

Nope - everything I've seen says that many of the rules start in 2025. And expire in 2029 - when presumably a Dem is in office, and will get blamed for increasing taxes....

[MDM]

With the passage of the Senate's version by both houses and the all-but-guaranteed signing by Trump, I've been trying to get a handle on how the bill will effect my personal taxes for 2025.

The best summary I found was from the Tax Foundation at https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/

They mention that the 10, 12, and 22 percent brackets will have their inflation adjustments increased by an extra year. My understanding is that means that they will apply the index factor again to the 2025 brackets making them slightly wider. Is that correct? Does anyone know more specifically what factor they'll use and/or what the ending brackets will be?

haven't the tax brackets been set for 2025, and this bill is for 2026 and forward?

Nope - everything I've seen says that many of the rules start in 2025.

This post in Case Study Spreadsheet updates has some details.