Young professionals working in a range of industries may feel like they’ve “made it” when the cross over into the six-figure threshold. Making $100,000 per year has been a goal many have set out to attain, and it can take some time in certain industries to hit this target. But with approximately one-fifth of the U.S. population earning this much money, and the number of six-figure earners living paycheck to paycheck surging, this sum isn’t what it once was.
Some would say a low-six-figure salary wouldn’t push an individual into the middle class, depending on where one chooses to live. Accordingly, that’s the sort of level I thought would be interesting to explore as a more telling view of just how much of an impact Trump’s recently-passed “Big Beautiful Bill” will mean for the top quartile of the U.S. economy. In terms of household income, roughly 40% of all U.S. households earn at least this much money, so it’s a reasonable sum to try to analyze from a tax perspective right now.
With that said, let’s dive in.
No Change to Trump’s 2017 Tax Cuts and Jobs Act
Traders looking at a stock ticker screen
Sometimes, retaining the status quo can result in a big win. In the case of a single filer earning $100,000 per year, the extension of Trump’s 2017 Tax Cuts and Jobs Act (which was set to expire) means that an individual earning this much money would save on the order of around $1,500 per year simply by paying taxes at the current tax bracket rates (as compared to the pre-2017 levels which were around 2% higher for each bracket).
Money money staying in one’s pockets is always a good thing, and this extension of previously-imposed tax cuts can have a meaningful impact on such filers (around 1.5% of one’s gross income stays in one’s pocket). That’s not a bad deal.
It’s unclear what may take place if a new administration looks to do away with these tax cuts down the road. But with these provisions now being made permanent, those earning these sums can feel free to earn even more if they can and take advantage of a small break as they climb the tax bracket ladder as their income grows.
Increased Standard Deduction (And No Taxes on Tips)
Calendar with the words “Tax Day” on the 15th
Another key element of this recently-passed bill is an increase in the standard deduction for single filers to $15,750 (and moving higher with inflation moving forward). So, for those concerned about tariff-driven inflation, this tax break could also increase over time and help offset some of these concerns. Silver linings are everywhere.
For an individual making $100,000 per year, this tax break amounts to around $300 compared to previous rules.
And for those who work jobs where they collect tips as part of their compensation, up to $25,000 of tipped income won’t be taxable. This tax break is available to those making up to $150,000 per year, so the fictional six-figure earner we’ve identified in this piece would be able to potentially forego paying around $7,000 in taxes come April, assuming they make up to the full $25,000 tipped amount for their work.
Expanded SALT Deduction
The words “State and Local Income Tax” on a personal notebook
One of the most pertinent tax breaks for six-figure earners (particularly in high-tax states) is the expanded State and Local Tax (SALT) deduction. This deduction has been increased from $10,000 this past year to $40,000 for the next five years. For someone who has a mortgage, large student loans, or other state and local taxes over and above the standard deduction, this benefit could amount to a tax benefit of up to $2,400 for someone making $100,000 per year.
The key is to claim every eligible expense that would fall under the SALT cap. This is where consulting with an accountant or financial professional can help.
But for those in certain coastal states with higher incomes (but higher taxes), this benefit will certainly help.
Other Benefits
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The bottom line is that the amount an individual making $100,000 will be able to save in taxes depends greatly on their personal situation. As mentioned, whether or not there’s tipped income as a portion of one’s total income will matter a great deal in terms of how much such a person will pay in taxes.
Additionally, if this six-figure earner has children, and expanded child tax credit (to $2,200 from the previous $2,000 level) would be a $200 net positive per child.
And for those who take on car loans, up to $10,000 can now be deducted in interest on qualifying loans.
So, it really depends on each individual’s personal circumstances. But for a six-figure earner, it’s safe to say that at least $3,000-$5,000 in tax savings is likely to be achieved, and potentially more depending on one’s circumstances.
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