The more things change, the more they stay the same. In 2025, major provisions from the Tax Cuts and Jobs Act of 2017 (TCJA) are set to expire. These provisions are widespread and likely to affect you as a taxpayer.
With the Trump administration returning to office in January 2025, the calculus for the expiration of these TCJA policies will likely change, as the administration indicated their willingness to extend most sunsetting provisions.
Let’s look at what this means to you as a taxpayer, and other potential tax changes Trump previewed during the presidential campaign.
Out With the Old
Following is a list of some of the key provisions that are set to expire December 31, 2025.
Individual Income Tax Rates
TCJA lowered the top tax rate from 39.6% to 37%. If TCJA is not extended, then the top tax rate will revert to 39.6%.
Standard Deduction & Personal Exemptions
With TCJA, standard deductions were raised, and personal exemptions were eliminated. If not extended, then the standard deduction will decrease significantly, and personal exemptions will be reintroduced.
Child Tax Credit
TCJA increased the child tax credit from $1,000 to $2,000. If not extended, then the credit will revert to $1,000 for each child under the age of 17.
Itemized Deductions
- TCJA imposed a $10,000 cap on the deduction of State and Local Taxes (SALT). If not extended, then state and local tax payments will become fully deductible again.
- TCJA eliminated miscellaneous deductions exceeding 2% of adjusted gross income (AGI). If not extended, then miscellaneous deductions exceeding 2% of AGI will be deductible again. These include investment fees, tax preparation fees, unreimbursed work-related expenses and more.
Qualified Business Income Deduction
TCJA introduced a 20% deduction for qualified business income. This will no longer be available once TCJA expires.
Alternative Minimum Tax (AMT)
AMT exemption amounts and income phase-outs were drastically raised when TCJA was enacted. If not extended, the AMT exemption and income thresholds will revert to their lower limits and expose more taxpayers to AMT.
Estate Taxes
The estate tax exemption was doubled when TCJA was enacted. If not extended, then the exemption will be reduced by half.
You can explore these provisions in greater detail here.
In With the New
With the Republicans winning both the Senate and the House, they have gained single-party control in Washington DC. While it’s possible that tax legislation could pass quickly because of this, it may not be passed until late 2025 due to the complexity of the effects of tax legislation. With the expiration of TCJA arriving at the end of 2025, tax legislation will likely be an early topic of the new administration’s discussion.
Following are some of the major proposals made by President-elect Trump and his team while campaigning.
TCJA Extension
Make expiring TCJA provisions permanent effective January 1, 2026, except for the $10,000 cap on SALT deductions.
Corporate Tax Rate
Reduce the corporate tax rate from 21% to 15% for companies that produce in the United States.
Business Provisions
Restore TCJA business tax provisions, including those allowing 100% bonus depreciation, R&D expensing and the interest expense limitation being based on EBITDA.
Income Exemptions
Exempt some types of income from federal income tax:
- Exclude overtime wages from income tax
- Exclude income from tips from income tax
- Exclude social security income from taxation
Child Tax Credit
Increase the child tax credit to $5,000 per qualifying child (proposed by Vice President-elect JD Vance).
Tariffs
Impose a 10-20% baseline tariff on imports and a 60% tariff on imports from China.
Need Help?
As we near the end of TCJA (and possibly its extension of key provisions) and with new tax policies potentially in the pipeline, both individuals and businesses need to stay informed and plan for the future.
Contact us here or call 800.899.4623 if you have questions about the possible expiration of TCJA or the incoming Trump administration’s tax proposals.
