How Taxes Could Increase for Younger, Childless Workers Without Key Deductions

Taxes can feel complicated, especially when tax laws are constantly changing. With the potential expiration of Trump’s Tax Cuts and Jobs Act (TCJA), many people, particularly younger, single full-time workers, could see their taxes rise—especially if they don’t have major deductions like children, mortgage interest, or high medical bills.

Once individual tax cuts expire after 2025, the TPC estimates that the majority of taxpayers—53.4%—will face a tax increase: 69.7% of those in the middle quintile (40th to 60th percentile) will pay more, compared to just 8% of the highest-earning 0.1%.29

Tax Policy Center. “Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act,” Page 8.

Here’s how it could happen:

1. Standard Deduction Shrinking

Under the TCJA, the standard deduction nearly doubled—making it $25,900 for married couples and $12,950 for single filers (in 2023). This was a big help to many people because they didn’t have to worry about itemizing their deductions (things like mortgage interest or medical expenses) if they didn’t have enough to surpass the standard deduction. Without a home mortgage or significant medical expenses, many people just took the standard deduction, which was a huge benefit.

If the TCJA expires at the end of 2025, the standard deduction will shrink back to pre-2018 levels. This means you’d have to earn less to qualify for the same deduction, potentially raising your taxable income if you don’t itemize, causing you to pay more in taxes.

2. Fewer Credits for Childless Workers

The Child Tax Credit was significantly expanded under the TCJA, making it a valuable tool for families with kids. However, if you don’t have children, you don’t benefit from this credit. When the TCJA expires, the credit will shrink back to $1,000 per child (down from $2,000), but for childless workers, this doesn’t help much. There are simply fewer tax credits available for middle-income individuals without children.

For many younger workers, Democratic tax policies are designed to provide more benefits for families and lower-income earners, but middle-income, childless individuals often find there are few credits or deductions they qualify for, especially if they don’t own a home or have substantial medical expenses.

3. Self-Employment and Small Business Taxes

If you’re self-employed or run a small business, you’ve likely benefited from the Qualified Business Income (QBI) Deduction, which allows you to deduct up to 20% of your business income. However, this provision is set to expire with the end of the TCJA. Without it, self-employed individuals could face a higher tax burden, as all of their business income would become subject to regular tax rates.

Example :

If you earned $100,000 in QBI and qualified for the deduction, you would reduce your taxable income by $20,000 and save $4,800 in taxes at a 24% tax rate. This allows small business owners to keep more of their earnings, directly lowering the amount they owe in taxes each year. The QBI deduction is a valuable tax break for many small business owners, but understanding the specifics of eligibility, phaseouts, and limitations is crucial for maximizing its benefits.

Additionally, self-employment taxes (Social Security and Medicare) can already be a hefty burden, and losing the QBI deduction would compound that. Younger, childless workers in the gig economy or who are small business owners could face a significant tax increase as a result.

Note that The Qualified Business Income (QBI) deduction does not reduce Self-Employment (SE) taxes. The QBI deduction only reduces income taxes, not the taxes you pay for Social Security and Medicare through self-employment tax. If you are a gig worker or have any self-employment income, you will pay 100% of those taxes, while employees pay half and their employers pay the other half.

4. Itemizing Deductions

Before the TCJA, many people itemized their deductions to reduce their taxable income. Common deductions included mortgage interest, charitable contributions, and medical expenses. However, without a mortgage or high medical bills, younger or childless workers typically don’t have enough expenses to itemize, meaning they rely heavily on the standard deduction.

If the TCJA expires and the standard deduction shrinks, but these workers still don’t have enough deductions to itemize, their taxable income will increase, causing them to pay more in taxes.

Impact of Democrat Tax Plans

While Kamala Harris makes campaign promises not to raise taxes on those making less than $400,000, we have to remember that these are only campaign promises. Every Democrat presidential candidate that has promised not to raise taxes on the ‘middle class’ has actually raised taxes on the middle class to pay for their programs. And the term ‘middle class’ is very vague. No one can decide what it really means. Even more important is to ask yourself how Harris plans to pay for all these big promises.

Her promises are mostly hot air. She has talked about giving $50,000 startup credits and $25,000 mortgage credits. Those credits will only apply to a very small segment of the population, the ones who can afford to start a business with $50,000 or buy a house. And the larger child tax credit plan, like all of these promises, must be approved by Congress.

Congress, not the President, actually decides

Despite campaign promises, tax policies in the United States are primarily decided by Congress. Specifically, the House of Representatives and the Senate are responsible for introducing and debating tax bills. The House Ways and Means Committee and the Senate Finance Committee are the key committees that draft tax legislation. Once both chambers of Congress approve a tax bill, it is sent to the President for approval or veto. The President can influence tax policy by advocating for certain reforms, but it is ultimately Congress that enacts tax laws.

As of 2024, the House Ways and Means Committee is chaired by Republican Jason Smith, and the Senate Finance Committee is chaired by Democrat Ron Wyden. This means that while the House is under Republican control, influencing tax policy towards maintaining or extending key provisions of the Tax Cuts and Jobs Act (TCJA), the Senate, with its Democratic majority, might push for different priorities, such as expanding credits for low-income families and increasing taxes on corporations and high-income earners.

These committees are crucial for determining the future of tax policies, as they decide what tax legislation gets introduced and debated in Congress. The differing priorities between Republicans and Democrats could result in significant discussions over which TCJA provisions to extend or modify, especially as the 2025 sunset date approaches for many of its tax cuts.

It’s possible that Congress could extend key provisions of the Tax Cuts and Jobs Act (TCJA) instead of implementing an entirely new tax scheme, but it depends heavily on political factors. Historically, when tax laws near expiration, Congress has sometimes extended them due to public and economic pressure. Given the popularity of some TCJA provisions—such as the larger standard deduction and lower tax rates—there might be bipartisan support to keep certain elements, though changes to specific parts like corporate taxes or high-income rates could still be debated.

In short, Republicans are more likely to support maintaining or making permanent the TCJA tax cuts, while Democrats may focus on increasing taxes for higher-income individuals and corporations to fund expanded social programs and credits for families. The final outcome will depend on negotiations between these committees and broader congressional leadership.

Reading Past the Headlines

If you only skim the headlines, you could believe that the TCJA should expire, basically because it lowers the taxes for the rich. Democrats always claim that lowering taxes costs money. This is government speak. Lower taxes do not cause deficits, increasing federal spending does. They do not know how to live within their means. Federal spending is dangerously out of the banks and threatens to wash away economic stability. But unfortunately, our government operates under the principle that federal spending creates growth.

Here is an example of an article that misses the point. https://taxpolicycenter.org/taxvox/those-making-450000-and-would-get-nearly-half-benefit-extending-tcja In the same article they grudgingly admit that it lowers taxes for most of the middle class. This article is by a left-leaning institution.

Biden/Harris’ plan will hurt the economy, worsening inflation and unemployment.

On a gross basis, we estimate Biden’s FY 2025 budget would increase taxes by about $4.4 trillion over that period. After taking various credits into account, the increase would be about $3.4 trillion. The tax increases would substantially increase marginal tax rates on investment, saving, and work, reducing economic output by 1.6 percent in the long run, wages by 1.1 percent, and employment by 666,000 full-time equivalent jobs. https://taxfoundation.org/research/all/federal/biden-budget-2025-tax-proposals/

Here are some more factual, less biased articles that explain the impact on small business owners . https://thehill.com/opinion/finance/4801222-small-business-taxes-kamala-harris/ https://www.kiplinger.com/taxes/election-impact-on-tcja-tax-cuts

Democratic tax policies often focus on raising taxes for higher-income earners and providing more relief to lower-income workers and families. However, middle-income, childless workers don’t always see the same benefits from these policies. They often don’t qualify for expanded tax credits (like the Child Tax Credit), and if they don’t own homes or have significant medical expenses, they miss out on many deductions.

Moreover, if Democrats push to raise taxes on corporations and high earners, small business owners who are pass-through entities (like sole proprietorships or LLCs) could see increased taxes if the QBI deduction expires.

In Summary

Without the expanded standard deduction, the Qualified Business Income deduction, or tax credits for children, younger, childless workers could face higher tax bills. If they don’t own a home or have enough deductions to itemize, they may end up with fewer ways to reduce their taxable income, making their overall tax burden heavier. With a potential return to pre-TCJA rules, these groups may find themselves paying more, even if they are still in the middle-income range.

Understanding how these potential changes could impact you can help you plan ahead by setting aside more money for taxes, and it’s important to keep an eye on how tax laws evolve to make informed financial decisions. But it’s also important to consider the underlying goals and assumptions that guide tax policy and how they are different in each party.