When Trump’s tax bill went into effect in 2018, it promised to simplify the tax code and cut taxes for many Americans. But, for high earners—especially those living in states like New York and California—it created a ripple effect that’s still being felt today. While some might think a tax cut sounds like good news, the reality is more complicated. In fact, certain changes in the law ended up increasing the overall tax burden for many upper-income households.
Let’s break down the 7 most surprising ways Trump’s Tax Cuts and Jobs Act (TCJA) may actually be hurting high earners—and why this matters to you.
1. The SALT Deduction Cap: A Big Hit for High-Tax States
One of the most controversial parts of the bill was the limit placed on the deduction for state and local taxes (SALT). Before the law, taxpayers could deduct all of their SALT payments. Now, that deduction is limited to just $10,000 per year.
What’s the big deal? If you live in a high-tax state like New York, California, or New Jersey, chances are your property taxes and income taxes combine to far more than $10,000. This cap means that wealthy individuals in those states can’t deduct a large chunk of their tax payments anymore, resulting in a much higher federal tax bill.
For example, imagine you’re a high-income earner in Manhattan paying $30,000 in state and local taxes. You’re now only allowed to deduct $10,000. That extra $20,000 in income is now fully taxable by the IRS. Ouch.
2. Mortgage Deduction Limits Tighten the Belt
If you’ve bought a pricey home recently, this one’s for you. The TCJA lowered the amount of mortgage interest that’s deductible. Previously, you could deduct interest on mortgages up to $1 million; now, it’s only up to $750,000 for new loans started after December 2017.
This especially hits hard in areas with high real estate costs. Think about Los Angeles or San Francisco where even a modest home can cost over $1 million. This change effectively raises the cost of borrowing for many high earners in expensive zip codes.
3. No More Deduction for Unreimbursed Job Expenses
Another new rule that’s flying under the radar? The elimination of miscellaneous itemized deductions—like out-of-pocket work expenses.
Before the law change, high-income professionals—like consultants, freelancers, and salespeople—could deduct expenses they paid on the job, such as travel, supplies, or professional dues. Under the new law, those deductions are gone.
If you’re someone who spends thousands on work-related costs that aren’t reimbursed, that money is now coming straight out of your pocket with no tax relief in sight.
4. Personal Exemptions Eliminated
Though the standard deduction increased under Trump’s tax bill (to $12,000 for individuals and $24,000 for married couples), the personal exemption was completely scrapped. That’s the deduction you used to get simply for being a person or for each dependent you claim.
Let’s say you have a larger family with several children. You may find that your standard deduction increase doesn’t make up for the loss of several thousand dollars in exemptions per household member. This change subtly raised taxes for many families making high incomes.
5. The AMT Wasn’t Eliminated, Just Adjusted
The Alternative Minimum Tax (AMT) was long seen as a tax trap for wealthy taxpayers. While many hoped it would be ended altogether, the TCJA simply raised the income level at which it kicks in.
This means some people might now avoid the AMT, but others—especially those living in high-tax areas—can still get caught by it. And what makes it worse? You can’t deduct those SALT taxes under the AMT either. Double whammy.
6. Cap on Deductions for Pass-Through Businesses
Trump touted the bill as small-business friendly, especially for “pass-through” entities where profits pass directly to the owner’s personal income taxes (think LLCs and S-Corps). Sure, it introduced a 20% deduction on income from pass-throughs… but there’s a catch.
If you’re a high earner in a service field—like law, medicine, or accounting—there are income thresholds to qualify for the full deduction. Once your income passes a certain point (around $415,000 for married filers), the deduction phases out or disappears entirely.
So while the headline says “tax cut,” the fine print tells a different story for high-income service professionals.
7. Sunset Provisions Looming
Lastly, here’s something many people overlook: A lot of the individual tax cuts are only temporary. Most of them are set to expire in 2025. This creates uncertainty and means most of the tax advantages could vanish in just a few years, while corporate tax cuts remain permanent.
What does this mean for high earners? Essentially, you might be paying more taxes now—and even more later if these cuts sunset and aren’t renewed. It’s hard to plan for the future with shifting tax laws looming on the horizon.
So, What Can High Earners Do Now?
If you’re in a high-income bracket and feeling the pinch from these changes, consider working with a qualified tax advisor. Some strategies—like bunching deductions, maximizing retirement contributions, or exploring tax-efficient investments—can help you minimize the impact.
Also, it’s crucial to stay informed and ready for changes ahead. With the 2025 sunset date approaching, the tax landscape could shift dramatically once again.
Final Thoughts
Trump’s tax bill was promoted as a win for taxpayers and businesses alike. But as we’ve seen, the reality for high earners—especially those in states with high taxes—is much more complicated. The combination of deduction limits, eliminated exemptions, and disappearing tax breaks has left many paying more while receiving less in return.
Understanding how these changes affect you is the first step toward smart financial planning. And if you’re curious about how this law compares to others or what’s in store for the future, we recommend checking out Investopedia’s full deep-dive article here.
Need more guidance?
Check out our blog post on how high-income earners can maximize deductions in today’s tax environment. Every dollar counts—and smart planning can make a real difference.
Disclaimer: This post is for informational purposes only. Always consult a professional for personalized tax advice.