Category Taxes & Tools

On May 14, 2025, the House Ways and Means Committee pushed forward a significant new tax reform bill proposed by Republicans. This bill would create close to $6 trillion in tax cuts but also includes around $2 trillion in tax increases to balance some of the costs. Its main goals are to continue key parts of the 2017 Tax Cuts and Jobs Act (TCJA), like lower tax rates for people and businesses, which would otherwise expire at the end of 2025. Additionally, the bill seeks to limit certain tax abuses by companies operating overseas and adjust specific tax benefits. The full House of Representatives plans to vote on this bill before the Memorial Day holiday.

The U.S. Treasury Department reported an unexpected budget surplus of $258.4 billion in April 2025, making it the second-largest surplus recorded in U.S. history. This surplus mostly resulted from high individual tax payments, as April is the month taxpayers settle the previous year's taxes and submit their first quarterly payments for the new tax year. Despite this good news, the overall financial situation remains challenging because the government continues to face a growing national debt. Between October 2024 and April 2025, the federal government accumulated a deficit of nearly $1.05 trillion, prompting policymakers to discuss major tax reform proposals to handle the ongoing fiscal pressures responsibly.

This week, a tax proposal supported by former President Trump sparked intense debate over its potential effects on Social Security. The plan, gaining popularity among some lawmakers, seeks to remove federal taxes on Social Security payments, overtime wages, and tips. While supporters say this change could quickly put money back into the pockets of retirees and workers, financial policy experts raise serious concerns. They warn that eliminating these taxes could reduce funds needed for Social Security, possibly leading to cuts of up to one-third in monthly retirement benefits by 2035. This risk leaves millions of current and future retirees uncertain about their financial stability.

On May 18, 2025, lawmakers introduced a major tax reform proposal aimed at significantly changing the way individuals and businesses are taxed in the United States. This new proposal includes measures designed to help middle-class Americans and small business owners by reducing their tax burdens and simplifying their financial planning. One important feature is the permanent extension of the Qualified Business Income Deduction, which helps business owners lower their tax payments. The proposal also increases this deduction from 20% to 23%, meaning businesses could keep more of their profits. Additionally, the bill includes targeted incentives to boost economic growth, especially important as the country faces concerns about recession and global economic shifts.

In 2025, the SALT deduction has become a central focus again, as Washington considers big changes to tax policy. Under the Tax Cuts and Jobs Act of 2017, this deduction, which allows taxpayers to deduct certain state and local taxes from their federal taxes, was capped at $10,000. This limit has greatly impacted taxpayers living in high-tax states such as New York, California, and New Jersey, as they argue it unfairly increases their federal tax burdens compared to other states. Now, with Republicans holding the presidency and Congress, President Trump and GOP leaders are pushing to raise or change this cap, which could provide relief to millions of taxpayers. However, the debate extends beyond traditionally "blue states," as taxpayers and lawmakers across the political spectrum look carefully at how adjusting this deduction may impact state budgets and overall tax fairness.

Understanding tax deductions and credits is essential for effectively managing your finances. Tax deductions reduce your taxable income, which means you’ll pay taxes on a lower amount. For example, if you earn $50,000 but have $5,000 in deductions, you only pay taxes on $45,000. On the other hand, tax credits directly lower the amount of tax you owe. So, if you owe $1,000 in taxes and qualify for a $200 credit, you only have to pay $800. Knowing the difference and which deductions and credits you may qualify for can help you save money and keep more of your hard-earned cash.