Wednesday was Tax Day in the United States as everyone was rushing to get their Federal & State Tax Returns submitted by that date. Ours were finished last Friday and we paid less in taxes than ever – as we lived off cash in 2025 and didn’t sell any investments for a gain.
A couple of our investments, including our rental townhouse, had losses. We booked those against our 2025 income. With all of our deductions, we ended up paying a low-single digit share of income in income tax. A new record!
Sometimes I listen to Larry Kudlow on XM Radio’s FOX Business Channel and he was strangely giddy on 4/15. He was trying to hype the newly permanent Trump Tax cuts, including the “no taxes on tips, overtime, and social security” benefits. “Today is like Christmas!” he gleefully opined. (Christmas you get gifts, I thought. Tax Day only means we were paying less. Oh joy!)
Treasury Secretary Scott Bessent was on the show and chatting up the notion that Trump’s “Big Beautiful Bill” (BBB) added up to an extra $4T in people’s pockets. That’s a 10-year figure, and it’s not evenly spread across those 10 years, but politicians know that we know that they exaggerate.
I think the tax cuts made permanent in 2025 add up to about $300B. That is actually LESS than the cost of the added spending Trump pushed through (and the cost of the inflation from Trump tariffs). Oh well, I’m still not going to complain about a tax cut – even if it fuels more inflation in the future.
One of the BBB tax changes that really benefited us is the elimination of the State & Local Tax deduction know as SALT. In Trump’s first term, they capped these deductions at $10K. Since we live in the high-tax, Blue State of MN, we could no longer deduct our full SALT amount for the last 8 years. As a result, we ended up paying more – but I even wrote at the time that I was fine with that limit in the interest of tax fairness.
Now, in this new Trump Term and new tax cut bill, the SALT deduction cap has been quadrupled to $40K. “A Gift From Trump to Blue State Democrats” wrote the financial press. I’m not sure why Biden & the Democrats didn’t eliminate the SALT cap when they had a chance in 2021?
Regardless, since we had $33.5K in State & Local Taxes in 2025, we saved about $5.2K in Federal Taxes (at the 22% tax rate we would have reached).
Again, I don’t think this tax deduction is quite fair to folks that live in low tax, low fraud states, but I don’t make the rules. I’ll be happy to bank that extra $7.5K in the short-term and invest it in something productive in the long run.
How were you impacted by the changes in the 2025 tax code?
Image: Pixabay
MrFireStation 
It is nice to get taxes done for another season. All of my changes were for 2026 taxes. We finished some home improvements in 2025 to take advantage of the expiring energy credits. Then, we moved investments around to ensure we are eligible for the reduced ACA tax credits. Will it work? I think so but I’ll let you know this time next year. Please do something fun with the $7.5K bump.
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On $2,000 greater Adjusted Gross Income over the past year, our 2025 taxes were 53% of 2024 taxes. The difference was mainly due to this year’s income not being made up of any consulting income, so no Self-Income Tax.
Here are some of the areas where we found some benefit from the previous tax code. We received a $1200 energy credit for super insulating the area around our forced air unit to put it inside the conditioned space. We received a $5,000 write-off for uninsured expenses caused by living in Declared Fire Zone.
Our SALT only came to $14,962, so we came out ahead claiming the Standard Deduction for $31,500. Note that California has Proposition 13 that limits government’s ability to raise your property taxes to 2% per annum based on your initial purchase price. Seniors who had paid off their home were losing their homes because they couldn’t afford the property taxes prior to Proposition 13 getting passed in 1979. California also does not tax Social Security, so we save on my wife’s Social Security.
My wife and I are both over 65, so we also got to claim two over 65 deductions for another $3300. We also qualified for two of the new over 65 Senior Bonus Deductions which are a maximum of $6,000 each. The Bonus Deduction phases out with income, so we were only able to receive $6,000 total. At our income bracket only 85% of Social Security Income is taxed.
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Don’t talk to me about taxes! I have both a pension and consulting income and that consulting income subject to both sides of FICA is a big tax bite.
When you think of the consulting income coming on top of pension and wife’s Social Security, each dollar earned is subject to a higher federal rate (28% at my level), state (11%), and FICA (14%), which at my math is 53%!!! I admit that those are rough numbers and don’t include the small business deduction.
My point is that higher marginal tax rates are a disincentive for someone to earn more.
I think I saw a slide that pointed out that the bottom 50% of earners pay 2.3% of taxes or a rate of 3.7% and the top 1% pay 60% of the taxes at a rate of 26.1%.
The tope 5-10% of earners ($178K-$261K) paid an average rate of 14.3%.
My point is the tax the rich folks who are all in the underclass or those who choose not to work to their full potential all talk about fairness without providing a definition of “Fair”.
When the tax the rich people ask me to sign a petition I always ask for the shirt off their back. That starts a conversation because they are asking me for more than the shirt on my back.
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