President Donald Trump has proposed a plan to abolish federal income taxes for Americans earning less than $150,000 per year, sparking curiosity on what people might take home should the plan be enacted.
Newsweek reached out to the White House by email for comment.
Why It Matters
Trump has proposed numerous tax plans, such as no taxes on tips or overtime, no taxes on Social Security payments and no federal income tax. The federal income tax proposal would remove taxes for people earning less than $150,000 per year and would impact the vast majority of Americans.
In 2022, around 93 percent of Americans aged 15 and over earned less than $150,000, according to the U.S. Census Bureau.
What to Know
Various types of income tax are taken out of American paychecks. There is federal income tax, state income tax and local income tax.
Americans pay other forms of taxes as well, such as Social Security and Medicare.
If Trump’s plan is enacted, Americans would still pay taxes at the state and local level, as well as Social Security and Medicare. However, their take-home pay would increase if federal income tax was removed.
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“Because federal marginal tax rates increase as you earn more income, someone in the 24% tax bracket stands to gain more than those in the 22% tax bracket, who in turn stand to gain more than those in the 12% or 10% income bracket. For example, someone earning $149,000 would save an estimated $25,300 on their federal taxes–an effective savings of about 17.0% per year,” SmartAsset’s Director of Economic Analysis Jaclyn DeJohn told Newsweek. “Meanwhile, someone earning $49,000 would stand to save about $3,896 annually on their federal taxes, or an effective rate of about 8.0%. In theory, these savings at the individual or household level could then be able to be passed on to local businesses to some extent.”
The average annual salary in the U.S. is $63,795. State and local income tax varies widely depending on location. If someone lived in Brooklyn, New York, with the current tax structure, this salary would yield an estimated semi-monthly paycheck of $2,000, according to a calculator by SmartAsset. This does not include deductions for retirement, health insurance or other benefits.
With this salary and location, around 17 percent would be taken out for taxes. Around 9 percent of this is federal income tax, equal to around $245 per paycheck. This means if federal income tax is removed, it would mean $490 more per month for this example.
Use the calculator to calculate what your paycheck would be depending on where you live and how much money you make.
Other calculators are available across the internet, including one through the Internal Revenue Service (IRS) available here, and one through jacksonhewitt.com available here.
What People Are Saying
University of Florida law professor Dennis Calfree told Newsweek: “A single individual who only has income from wages, never been married and uses the standard deduction in 2025 would save $25,247 in income tax.”
Calfree added: “This idea may be a difficult one to get over the finish line.”
DeJohn told Newsweek: “While it is important to note the proposal to eliminate income taxes on those making less than $150,000 per year remains hypothetical at this point, different income levels may yield very different theoretical savings rates for those who would qualify.”
Trump told the 2025 Republican Issues Conference in Miami on January 27: “America’s gonna be very rich again and its gonna happen very quickly. It’s time for the United States to return to the system that made us richer and more powerful than ever before.”
Trump added: “Instead of taxing our citizens to enrich foreign nations we should be tariffing and taxing foreign nations to enrich our citizens. Does that make sense? Right?”
SmartAsset said in its website: “The amount withheld from each of your paychecks to cover the federal expenses will depend on several factors, including your income, number of dependents and filing status.”
What Happens Next
It is unclear when Trump’s plan might be enacted, if it happens.
