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Tax Cuts and Jobs Act Expirations: Changes That May Impact You

Many of the Tax Cuts and Jobs Act provisions are set to expire by 2026. Learn what these changes are and how they may impact you.

Taxes are a certainty for every American; however, expirations to the Tax Cuts and Jobs Act (TCJA) in 2025 may cause many to deal with an increased tax burden. Many of the provisions of the TCJA which apply to individuals and families are slated to expire, resulting in higher tax rates, reduced deductions, and a lower estate tax threshold.

While the significance of these changes isn’t in doubt, you may not entirely know what they’ll mean to your financial situation. In this article, we’ll outline what impacts the upcoming TCJA expirations may have on you and your bottom line. We’ll also explain what you can do now to prepare for a potentially increasing tax burden come 2025.

Key Takeaways

  • By 2026, several provisions of the TCJA are set to expire unless Congress intervenes.
  • Individual tax rates will revert back to pre-TCJA levels. Corporate rates, on the other hand, won’t be affected.
  • The estate and gift tax thresholds will be cut in half if the expirations go through.
  • Wealthy and middle-class individuals will likely see the biggest impact due to increasing tax rates and the raising of the estate and gift tax exemptions.
Tax Documents Next to Capitol Building

What Is the Tax Cuts and Jobs Act?

The Tax Cuts and Jobs Act (TCJA) is a congressional act signed into law by President Donald Trump in 2017. The legislation officially went into effect on January 1, 2018. The law influenced the Internal Revenue Code of 1986, changing several tax rules and regulations. As a result of the TCJA, individuals, families, and businesses saw several changes to their tax bracket, deductions, and exemptions, among other modifications.

These sweeping changes have had a profound impact on Americans. According to Robert Persichitte, CPA, a tax professor at MSU Denver and a Certified Financial Planner™ professional at Delagify Financial, “For most people, [the TCJA] lowered their taxes. However, for a small group of households filing a married joint return, with a mortgage, no kids, and about $200,000 in income, their taxes increased.”

The purpose of the TCJA, as its name hints, is to cut taxes and, secondarily, simplify the IRC. Per Stephen Kates, CFP, principal financial analyst at RetireGuide, the goal was to “lower taxes on corporations and pass-through businesses, which are not set to expire at the end of 2025.” On the other hand, any “changes to the personal income tax rates were a bonus and offered both simplification and savings for nearly all Americans.”

What’s at Stake with This Change?

Aside from the tax cuts for businesses, many other provisions currently benefitting individuals and families are set to expire in 2025. If they do, people can expect significant financial impacts, including on their income taxes, personal exemptions, and more. The impending expirations will also impact the federal estate tax threshold, currently at $13.61 million.

Here is a breakdown of what you can expect to change:

Individual Tax Rates

The expiration of the TCJA’s income tax cuts stands to impact a large number of Americans. In this case, tax brackets (and their accompanying rates) will return to what they were before the legislation passed. Unfortunately, this equates to a higher tax burden for most individuals.

The following tables display the tax rates for 2024 and what they would be if they roll back to pre-TCJA numbers:

Single Filers:

Taxable Income2024 Tax RatePre-TCJA Tax Rate
$0 to $11,60010%10%
$11,601 to $47,15012%15%
$47,151 to $100,52522%25%
$100,526 to $191,95024%28%
$191,951 to $243,72532%33%
$243,726 to $609,35035%35%
$609,351 or more37%39%
Tax rates and income ranges above are courtesy of the U.S. Internal Revenue Service (IRS).

Married Filing Jointly:

Taxable Income2024 Tax RatePre-TCJA Tax Rate
$0 to $23,20010%10%
$23,201 to $94,30012%15%
$94,301 to $201,05022%25%
$201,051 to $383,90024%28%
$383,901 to $487,45032%33%
$487,451 to $731,20035%35%
$731,201 or more37%39%
Tax rates and income ranges above are courtesy of the IRS.

Standard Deductions

As of 2024, one may deduct $14,600 ($29,000 for spouses filing jointly). The legislation also increased the size of the child tax credit. Starting in 2026, both are set to decrease substantially, reverting to pre-TCJA levels. For reference, the standard deduction for 2017 was $6,350 ($12,700 for spouses filing jointly), which is about half of what it currently sits at.

Estate and Gift Taxes

One of the potential biggest consequences is the expiration of the current estate and gift tax rules. The TCJA nearly doubled the federal tax threshold, originally bringing it up to $11 million after it was set at just $5.49 million in 2017. As a result of the TCJA, large estates of high-net-worth and ultra-high-net-worth people could avoid or pay far less taxes than before.

The shift back to pre-TCJA estate tax exemptions poses significant challenges to those planning to pass down immense generational wealth. With the Great Wealth Transfer to pass trillions from boomers to Gen X, millennials, and Gen Z, millions more in taxes are set to be paid. For this reason, it’s as important as ever to ensure you have an estate plan in place that seeks to lessen the tax burden, especially through methods such as gifting or placing funds in a trust. Moreover, it’s crucial to speak with a financial advisor to ensure your plan is on the right track.

Alternative Minimum Tax (AMT)

In the wake of the TCJA, the number of Americans who owed the AMT, a federal tax that applies to certain people based on income, dramatically decreased. This is because the legislation limited the state and local tax deduction (SALT) to $10,000 while increasing the exemption amount and income phaseout threshold to $85,700 and $609,350, respectively.

Once these rules expire in 2025, the exemption amount and threshold will go down, increasing the percentage of Americans who owe this tax back to pre-TCJA levels.

Who It Impacts the Most

The TCJA’s sunset will potentially have a resounding impact on many individuals’ finances, but who should expect the biggest change? Both middle-class and high-net-worth individuals are likely to experience the most significant effects. This is, in large part, due to the changes in individual tax rates, as well as the modification to estate and gift tax thresholds.

Provided individual tax rates see a return to pre-TCJA levels, middle-class households can expect to owe more to the IRS each year. For instance, joint filers making between $94,301 and $201,050 will owe 22% in 2024. However, pre-TCJA rates would require 28%, a jump of 4%. While some may be able to easily eat the cost of paying more taxes, the change may squeeze families with higher expenses.

While high-net-worth individuals won’t experience as significant of an income tax rate jump, the estate and gift tax threshold will likely cause new problems. Without Congressional intervention, the existing estate tax exemption of $13.61 million will likely be sliced in half. For those with generational wealth to pass down, their estate may owe up to 40% in taxes, depending on the size.

In addition to taxpayers, the wealth management industry is likely to feel the effects of the TCJA sunset. Persichitte explains that the looming changes “make things tricky.” Advisors “need to run two financial plans for clients because [they] don’t know when or if the TCJA will sunset.” He adds that professionals “must make some baseline assumptions and build a financial plan. Some of those assumptions will be wrong, but it’s our best guess as of today.”

How to Prepare for the Upcoming Change

While Congress may still prevent the expirations from happening, it’s crucial to be ready for any changes that may come your way. This includes preparing for the possibility of paying more in taxes, as well as planning for modifications to estate tax exemptions. Because of the ambiguity that the TCJA sunset presents, it’s wise to work with the tax planner or financial advisor to be ready.

Stephen Kates, an experienced financial advisor, recommends that Americans “consider ways to offset future taxes now or adjust their income and investments to better minimize taxes. Marginal tax rates will rise which means investment income will cause additional taxes, especially if it pushes someone into a higher tax bracket.” In addition, placing “assets” in tax-advantaged accounts, such as “IRAs or 529s,” as well as “adjusting investments into tax-efficient options will directly save people money,” says Kates.

Before changing your financial plan, we recommend hiring an advisor or tax professional to ensure you make the right decisions for your needs. In particular, a fiduciary expert, such as a certified financial planner (CFP) or certified public accountant (CPA) would be ideal to ensure you pay taxes correctly and are on track toward important goals, such as retirement or paying your children’s education.

If you need to jumpstart your search for an advisor, consider using a free matching tool, such as this one. After filling out a short quiz regarding your current situation and goals, it will pair you with a vetted option near you.