How The Expiration Of The TCJA Could Impact Your Taxes

The Tax Cuts and Jobs Act (TCJA) of 2017 brought sweeping reforms to the U.S. tax landscape, heavily influencing both individual and corporate tax codes. However, as we approach the end of 2025, many of these provisions are slated to expire. While President Donald Trump has advocated for extending all expiring provisions, Vice President Kamala Harris has indicated support for maintaining certain provisions to prevent tax hikes on those earning less than $400,000.

Significant Expiring Provisions:

• 1. Standard Deduction and Personal Exemptions: The TCJA nearly doubled the standard deduction and eliminated personal exemptions. If the provisions expire, the standard deduction for a married couple could decrease to $16,525, while personal exemptions would be reinstated at about $5,275. The extension of these provisions could see the standard deduction remain at $30,725, maintaining its current level.
• Individual Income Tax Rates: The TCJA reduced tax rates, lowering the top rate from 39.6% to 37%. Should these rates expire, they would revert to their higher pre-2017 levels.
• State and Local Tax (SALT) Deduction: The act capped SALT deductions at $10,000, significantly impacting high-income earners in high-tax states. The expiration would allow a full deduction of state and local taxes paid, providing relief primarily to these taxpayers.
• Child Tax Credit: Increased from $1,000 to $2,000 per child, this popular credit faces a potential rollback to $1,000, decreasing its real value by nearly 25% compared to its high in recent years.
• Small Business Income Deduction: The TCJA introduced a 20% deduction for pass-through business income. Failure to extend this provision would mean the disappearance of this benefit.
• Alternative Minimum Tax (AMT): By increasing exemption amounts, the TCJA limited AMT liabilities. The expiration would reduce exemptions, thus increasing AMT exposure for more taxpayers.
• Estate Taxes: Changes to estate tax exemptions doubled their value. They too are at risk of halving should these provisions sunset.

Non-Expiring Provisions:

The TCJA’s corporate tax policies, notably reducing the corporate tax rate to a flat 21%, have been enacted permanently. However, provisions related to bonus depreciation for assets are on a phased reduction plan and will be nonexistent by 2026.

Legislative Context and Uncertainty:

Currently, the House is advancing a broad budget resolution aimed at addressing tax reform, amidst debates over strategic approaches between the House and Senate. Disagreement centers on whether to tackle the expiring TCJA provisions in one comprehensive bill or to first pass a narrower bill focusing on immediate priorities, such as immigration and defense, which the Senate has favored with a recent resolution.

Senator Lindsey Graham supports a Senate strategy that focuses on immediate pressing issues, while Trump endorses the House’s one-bill approach to advance his full agenda. The House aims to combine fiscal responsibility with economic growth through spending cuts alongside tax reductions.

However, critiques arise over potential increases to the deficit and cuts to essential services like Medicaid. The House resolution hinges on $2 trillion in spending cuts to balance the proposed $4.5 trillion tax reductions, illustrating the contentious path forward as lawmakers try to navigate the complex fiscal and legislative landscape.

Revenue Implications and Distributional Effects:

The expiration of TCJA provisions could increase government revenues by $4.6 trillion over the following decade, disproportionately impacting wealthier individuals who stand to face the greatest tax increases, should these provisions lapse without legislative extension.

As the expiration deadline looms, taxpayers and policymakers must prepare for potential shifts. Whether extensions are granted, or provisions are allowed to sunset, the impacts on both the economy and individual taxpayers will be significant. Keeping informed and planning accordingly will be crucial as 2026 approaches.

Prepare for the Changes with Dallo Law Group

If you are concerned about how the expiration of the TCJA could impact your personal or business tax situation, the experienced attorneys at Dallo Law Group are here to help.

Our team specializes in strategic tax planning and can provide clear, practical guidance to help you navigate the coming changes with confidence. Contact Dallo Law Group today to schedule a consultation and ensure you are prepared for whatever the future of tax law holds.

Contact: 619-912-0616