Major TCJA Provisions Set to Expire After 2025

The Tax Cuts and Jobs Act (TCJA), enacted in 2017, brought sweeping changes to the U.S. tax code. However, many of the law’s individual and business tax provisions were designed to sunset after December 31, 2025. With that date approaching, it’s crucial for taxpayers to understand what may change — and how to prepare.

Key Individual Tax Provisions Set to Expire

• Income Tax Rates: The current seven-bracket system (10%–37%) will revert to pre-TCJA rates (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%).

• Standard Deduction: The nearly doubled standard deduction will be reduced, and personal exemptions — previously eliminated — will return.

• Child Tax Credit: Will decrease from $2,000 to $1,000 per child, with a reduced refundable portion.

• SALT Deduction Cap: The $10,000 cap on State and Local Tax (SALT) deductions will be lifted, allowing full deductions.

• Alternative Minimum Tax (AMT): Exemptions and phase-out thresholds will drop, potentially affecting more taxpayers.

Business Tax Provisions Affected

• Pass-Through Deduction: The 20% qualified business income deduction (Section 199A) for sole proprietors, partnerships, and S corps will expire.

• Bonus Depreciation: Phasing out fully by 2027, with a drop from 100% to 80% in 2023 and eventual elimination.

• Estate & Gift Tax Exemption: Will decrease from ~$13 million to about $6 million per individual, adjusted for inflation.

 Implications for Taxpayers

• Higher Tax Bills: Both individuals and business owners may owe more due to lower deductions and higher tax rates.

• Estate Planning Impact: Lower exemption levels may require strategic updates to trusts and gifting plans.

• Business Planning: Decisions around depreciation, entity structure, and retirement planning could be affected.

Legislative Outlook

• Republican Proposals: Proposals to extend some TCJA provisions are already being debated in Congress, including extensions to tax cuts and business deductions.

• Budgetary Impact: Permanently extending these tax cuts may increase the federal deficit by trillions, adding complexity to future policy decisions.

Action Steps for 2025 Planning

• Review Your Financial Plans: Consider how your tax position will change in 2026 under current law.

• Consult a Tax Professional: Especially for high-net-worth individuals and business owners, professional planning is key.

• Stay Updated: Follow developments in Congress throughout 2024 and 2025 that may impact the final outcome.

Want to talk through how these potential changes may affect you?
Contact our office for a proactive tax strategy session.

Source: Congressional Research Service – R47846