Tax Changes in 2026: Impact on the US Economy
The tax cuts proposed in President Donald Trump's "One Big Beautiful" bill will significantly impact the US economy in 2026. Economists predict that these changes, for both individuals and businesses, will provide a significant boost to the country's economy.
Individual Taxes: Refunds and Deductions for Households
For individuals, changes in tax rates and relief will increase household incomes beginning in 2026. Through a combination of larger tax refunds and higher payroll deductions, many people will see an increase in their disposable income. Some key changes include larger tax deductions for individuals and businesses, as well as extending the lower income tax rates that have been in place since 2017. Taxes on tip income and overtime pay will also be exempt up to $25,000 and $12,500, respectively, although they will gradually decrease for individuals earning more than $150,000. Deductions for auto loan interest payments and state taxes will also be expanded, benefiting wealthy homeowners in high-tax states.
Business Taxes: Incentives for Investment and Growth
For businesses, tax cuts focus on encouraging greater investment in their businesses, including tax deductions for capital expenditures and research and development (R&D). These tax cuts include an extended lower corporate tax deduction, as well as tax incentives for U.S.-based equipment purchases and R&D expenses. This will allow businesses to reduce their expenses more quickly and encourage growth in the technology and manufacturing sectors. Additionally, looser rules on interest expense deductions and "pass-through" business owners will also provide tax relief for sectors like restaurants, law firms, and private equity firms, although some experts are divided on how effective these cuts will be in stimulating economic growth.
With these cuts and changes, the U.S. economy is expected to experience a significant boost in 2026, although the effects of these policies are still debatable.
Source: Newsmaker.id
