A number of federal tax provisions included in the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire after December 31, 2025.  Many of these provisions were designed to reduce taxes in order to stimulate economic growth but included sunset clauses that will automatically revert back to the pre-TCJA rules unless Congress takes action.  Some of the key expiring provisions are listed below.

Tax Brackets: The TCJA reduced the marginal tax rates by 2% to 4% in most tax brackets.   Beginning in 2026, tax rates will revert to the higher pre-2017 levels. For instance, the top marginal rate is currently 37% and will increase back to 39.6% in 2026, affecting high-income earners the most.   Taxpayers below the top bracket will also feel the impact since the marginal rate for most of the lower tax brackets will also increase.

Standard Deduction: The TCJA approximately doubled the standard deduction, making it more beneficial for many taxpayers to opt for it instead of itemizing deductions.  This change simplified tax filing for millions of Americans.  In 2026, the standard deduction will be reduced, increasing taxable income for many taxpayers, making it more beneficial to maintain receipts and itemize deductions.   

$10,000 Cap on State and Local Taxes (“SALT”): The TCJA limited the SALT portion of itemized deductions to $10,000, which significantly impacted taxpayers in high-tax states. If the cap expires, taxpayers will again be able to deduct the full amount of their state and local taxes. 

Miscellaneous Itemized Deductions: The TCJA eliminated this category of itemized deductions altogether.  These deductions include certain unreimbursed job-related expenses, investment fees and expenses, and tax preparation expenses.  In 2026, these deductions will be allowed again, but only if the total exceeds 2% of AGI and only if a taxpayer itemizes deductions.

Alternative Minimum Tax (“AMT”): Although it wasn’t eliminated altogether, the TCJA increased the AMT exemption amounts and phase-outs which substantially reduced the number of taxpayers subject to AMT.  In 2026, the AMT exemptions and phase-outs revert to pre-TCJA levels and many taxpayers will again be subject to AMT.

Child Tax Credit (CTC): The TCJA increased the CTC from $1,000 to $2,000 per child and raised the income thresholds for phaseouts, making the credit available to more families. When this provision expires, the credit will revert to $1,000, and the income thresholds will lower, meaning fewer families will qualify for the full credit.

Home Mortgage Interest Limitation: Under the 2017 law, interest can be deducted on up to $750,000 of home acquisition debt.  In 2026, the limit reverts back to $1 million. In addition, the interest paid on some home equity lines of credit will be deductible again.

Qualified Business Income Deduction “QBI”: The QBI deduction is a special deduction equal to 20% of qualified business income for certain self-employed individuals and also individuals with interests in eligible pass-through.  The QBI deduction expires in 2025.  The provision was put in place to put the tax rate structure for pass-through business owners closer to the C corporation rates after a reduction in corporate rates to 21%. Not all businesses qualify for the QBI deduction, but for those who do it will result in a substantial increase in tax if the QBI deduction expires.  

Note: the 21% tax rate for C Corporations does not expire at the end of 2025. It was considered a “permanent” change (nothing is truly permanent).

Depreciation: Under TCJA, bonus depreciation was set to gradually phase out between 2022 and 2027. Currently, businesses can take advantage of 60% bonus depreciation in 2024, 40% in 2025 and 20% in 2026.  Under current law, bonus depreciation expires completely after 2026. Unless purchases qualify for section 179 deduction, this leaves taxpayers with much less attractive (and longer) alternatives.

Estate Taxes: The TCJA doubled the estate and gift tax exemption, allowing individuals to pass up to $13.6 million (as of 2024) without incurring estate and gift tax.  That is approximately $27 million for a married couple.  In 2026, the exemption amounts will be cut in half.  For those with significant estates, it is not too early to meet with advisors and determine what, if any, actions need to be considered prior to 2026.

 

The expiration of these federal tax provisions in 2025 will have widespread implications.  Congressional leaders are fully aware of the expiration of the TCJA provisions. However, based on recent history, Congress has been unable to agree and enact any widespread extensions or replacement provisions.  We will continue to monitor this and look forward to helping our clients navigate through any changes that may arise.