Under Trump, millions of Americans could pay $0 in federal income taxes — here’s the bill that could be eliminated entirely

President Donald Trump’s new tax bill reduces the income tax liability of many Americans.

In total, about 40% of American households could pay $0 in federal income taxes in 2025, according to the Tax Policy Center (1). That’s in line with the 40% of households that had a $0 federal tax bill in 2022, under the Biden administration. However, Trump’s tax cuts favor specific groups, meaning you could see a $0 tax bill for the first time if you meet certain conditions (2).

Here’s a closer look at who will come out on top.

Trump’s One Big Beautiful Bill Act (OBBBA) specifically favors seniors, employees who earn tips and overtime, and those with children.

Here’s an example: Casey and Riley earn a combined income of $100,000 and have two children, both under 13 years old. Their regular deductions allow them to significantly reduce their taxable income, with $31,500 in standard deductions, $6,800 in 401(k) contributions, $6,800 in health insurance premiums, $1,260 in a health Flexible Spending Account (FSA), and $3,000 for dependent care FSA.

But the new bill adds another deduction to this list: overtime pay. Together, Casey and Riley can deduct an additional $10,000 because of this.

In total, their taxable income is reduced to $40,640 after all subtractions and deductions, leaving them with a tax liability of $4,400. However, Casey and Riley also receive the maximum child tax credit of $2,200 per child, up from $2,000 last year. The combined $4,400 tax credit offsets the amount they owe in taxes and effectively leaves them with a $0 bill.

Similarly, a retired couple who are 66 years old and earn a combined adjusted gross income of $96,700 could reduce their taxable income by $34,700 under the existing standard deduction. However, the OBBBA introduces a new senior deduction worth $6,000 each or $12,000 together, bringing your combined taxable income to just $50,000 (3).

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Because this $50,000 is derived from capital gains and qualified dividends, it is subject to the 0% tax rate for such income (4). The elderly couple could pay $0 in federal income taxes.

These are just a few examples of how some families can eliminate their total liability by taking advantage of all the tax deductions and credits available to them. However, federal taxes are only part of the story.

Although many Americans are expected to benefit from the new tax rules, there are several caveats to consider.

For example, a $0 federal tax bill does not necessarily mean that your tax liability is zero. You could still face federal payroll taxes and state and local income, sales and property taxes, some of which could increase to offset these cuts. According to the National Association of Counties, OBBBA shifts the burden of costs from the federal level to the state and local levels, meaning counties may have to cut services or raise local taxes to offset the later impact (5).

It is also worth noting that the Trump administration has cut income taxes and at the same time increased taxes (tariffs) on imports. Tariffs announced through October 3 could cost each taxpayer an additional $2,800 in 2026, according to calculations by the Tax Policy Center (6).

Bottom line: The national tax code has been significantly revised and a professional financial expert could help you estimate the total tax burden you and your family face this year; It’s likely to be different than what you’re used to.

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Fiscal Policy Center (1); Fiscal Policy Center (2); Wall Street Journal (3); US Internal Revenue Service (4); National Association of Counties (5); Tax Policy Center (6)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.