U.S. Commerce Secretary Howard Lutnick told CBS News that President Donald Trump’s goal is to scrap taxes for people earning less than $150,000 a year. This means the majority of U.S. citizens would no longer have tax burdens, since more than 76% of Americans make less than $150,000 a year, according to Statista data.
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This would, without a doubt, be a massive change for the majority. But if you’re earning just a bit more, say $200,000, what happens then?
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What You’d Owe on a $200K Salary
If you make a $200,000 salary, you wouldn’t benefit from Trump’s no-tax plan, unfortunately. In other words, your tax situation will stay the exact same, and you’d most likely owe Uncle Sam around the same amount.
Say you make $200,000 in 2025. After subtracting the standard deduction, which in 2025 is $15,000 for single filers, your taxable income goes down to $185,000.
From there, your income is taxed in chunks based on federal tax brackets. Here’s how it breaks down:
The first $11,925 is taxed at 10%, which comes out to $1,193.
The amount from $11,925 to $48,475 is taxed at 12%, which is about $4,386.
From $48,475 to $103,350, you’re taxed at 22%, which adds up to around $12,073.
From $103,350 to $185,500, you’re taxed at 24%, which totals about $19,596.
Add all of that up, and your total federal income tax bill would be around $37,247.
That’s a pretty big difference compared to someone making $140,000 — just under the $150,000 cut-off point. They would get to save around $20,000 on taxes under Trump’s plan.
So, for earning $60,000 more, you’d have to pay just under $40,000 to Uncle Sam, while someone just under the cap potentially pays nothing.
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How Would the Government Replace Tax Income?
Trump plans to make up for the lost tax revenue by leaning on tariffs.
His proposal includes:
Placing tariffs on imported goods
Creating a new agency called the External Revenue Service to handle these tariffs
Reducing America’s reliance on the IRS.
“Instead of taxing our citizens to enrich foreign nations, we should be tariffing and taxing foreign nations to enrich our citizens,” he said at the House GOP Issues Conference in January. “Under the American first economic model, as tariffs on other countries go up, taxes on American workers and businesses will come down, and massive numbers of jobs and factories will come home.”
However, critics argue that Trump’s plan could lead to higher prices on everyday items, since companies tend to pass tariff costs down to consumers. This means even those who might keep more of their paychecks could see increased living expenses.
Here’s How You Can Lower Your Tax Bill If You Make $200K
Whether Trump’s no-tax plan actually happens or not, you should always be looking into ways to save on your tax bill.
Here are a few ways to lessen your tax burden:
Max out your 401(k) or traditional IRA: Because your traditional 401(k) contributions are taken out from your paycheck before you’ve even paid taxes, your taxable income will be lower, which means lower federal taxes. Your traditional IRA contributions may also be tax deductible.
Use an HSA: If you qualify, a health savings account lets you set aside pre-tax dollars for medical expenses, which reduces your taxable income today. Plus, these accounts grow tax-deferred, and your distributions can be tax-free if you meet certain conditions.
Move to a no-income-tax state: Nine states currently don’t levy individual income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
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This article originally appeared on GOBankingRates.com: Trump Wants To Eliminate Income Taxes: Here’s How Much Extra You’d Take Home If You Make $200K a Year
