President Trump is no stranger to big changes in tax policy, and one of his proposals is perhaps his most audacious: the elimination of the federal income tax. While this hasn’t come to pass yet, it’s possible that he could try to find a way to make it work. It’s an interesting proposition now, during tax season 2026, when you sit down to file the 2025 tax year.
Federal taxes take the biggest bite out of your earned income because they pay for many important programs and services. Still, who wouldn’t enjoy being free of this huge chunk of tax? Though people at any income level could see relief if they didn’t have to pay federal income tax, it really starts to pay off at higher levels. Here, we’ll break down how much someone earning $250,000 a year would keep if this policy actually happened.
Current State of Income Taxes
The U.S. tax code continues to use a progressive tax system, meaning your income is taxed in layers, also known as brackets, not at a single flat rate. The IRS also increased the standard deduction for 2026 due to annual inflation adjustments, and remember, these deductions reduce taxable income unless the taxpayer chooses to itemize instead.
According to the IRS, the 2026 standard deduction is:
- $16,100 for single filers
- $32,200 for married couples filing jointly
- $24,150 for heads of household
Read Next: What Are Progressive Taxes and How Do They Work?
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2026 Taxes on a $250,000 Household
For a single filer, a $250,000 income minus the $16,100 standard deduction is $233,900 taxable income. For married taxpayers filing jointly, about $220,800 is taxable, leading to around $39,000 owed. That’s tens of thousands of dollars currently sent to the IRS that most households could keep if income taxes were eliminated.
Single Filers
Using the 2026 IRS tax brackets for single filers, here are a few takeaways:
- 10% on the first $12,400 = $1,240
- 12% on $12,400-$50,400 = $4,560
- 22% on $50,400-$105,700 = $12,144
- 24% on $105,700-$201,775 = $23,034
- 32% on $201,775-$233,900 = $10,272
- Total estimated 2026 tax: $51,250
Married Filing Jointly
For a married couple filing jointly, making a $250,000 income minus the $32,200 standard deduction would leave about $217,800 of taxable income. Using the 2026 IRS brackets:
- 10% on the first $24,800 = $2,480
- 12% on $24,800-$100,800 = $9,120
- 22% on $100,800-$211,400 = $24,244
- 24% on $211,400-$217,800 = $1,536
- Total estimated 2026 tax: $37,380
But Where Does the Money Come From?
While all that money back in your pocket sounds great, there’s a problem. Your federal tax income goes to pay for a lot of things that are essential to every American’s lives, such as highways, law enforcement, social services, park systems, healthcare and more.
Without your taxes paying into the federal coffers, that money would have to come from somewhere else. Some possibilities could include a national sales tax, higher payroll taxes or even cuts to essential government programs like Medicare and Social Security.
Who Wins, Who Loses?
While this all sounds potentially great, note that a high earner, making $250,000, is going to see a more significant savings than a lower earner. While you can argue that equity isn’t an issue, since it is the earner’s income either way, inequity could enter the chat if a new method for funding essential services comes to pass. Then, lower earners could end up footing a larger proportion of that “bill.”
What Would You Do With the Money?
If Americans did get this tax windfall by eliminating federal income taxes, it would be a rare opportunity to really get ahead — saving and investing extra money. Here are a few things you could do with that extra cash:
- Pay down high-interest debt.
- Boost retirement contributions.
- Build a larger emergency fund.
- Consider tax-advantaged investing strategies (since other taxes could rise).
Would It Really Be Worth It?
While eliminating federal income taxes would give someone earning $250,000 a dramatic short-term pay boost, the funds for essential services would have to come from somewhere. New costs could show up in other areas.
Instead of banking on a theoretical change in your taxes, it’s best to focus on what you can control today to make the most of your paycheck, such as taking maximum tax deductions and credits and engaging in smart financial planning.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: How Much You’d Take Home Making $250K a Year If Trump Eliminates Income Taxes
