Is the Tax Cut and Jobs Act Expiring

The Tax Cuts and Jobs Act (TCJA) of 2017 was one of the most sweeping tax overhauls in decades, restructuring individual income tax rates, lowering the corporate income tax rate, and nearly doubling the standard deduction and estate tax exemption (among other changes). But there's a plot twist: many provisions of the TCJA will expire at the end of 2025. 

Now is the time to understand which aspects of the TCJA will expire so you can help your clients mitigate the potential impact. 

Is the Tax Cut and Jobs Act Expiring?

The short answer is partially. While most corporate tax cuts resulting from the TCJA will remain in effect after December 31, 2025, the majority of the personal tax provisions, including the expanded standard deduction and Child Tax Credit will expire or revert to pre-TCJA standards.  

What is the Tax Cuts and Jobs Act? 

Jump to expiration information

First, let’s recap how the TCJA changed the tax landscape. 

Keep in mind that it made significant changes to the tax code, so we’re not going to go into all the minute details, but we do want to provide an overview of the changes most likely to affect you and your clients. 

How the TCJA changed personal taxes 

The TCJA substantially changed the tax rates and base for individual income taxes. The major provisions include: 

• Reducing statutory tax rates at almost all levels of taxable income and shifting the threshold for several income tax brackets 
• Repealing the personal and dependent exemptions 
• Increasing the standard deduction for all filing statuses 
• Increasing the Child Tax Credit (CTC) and creating a new $500 tax credit for dependents not eligible for the CTC 
• Capping itemized deductions for state and local taxes (SALT) at $10,000 
• Limiting deductibility of mortgage interest to the first $750,000 of loan principal and eliminating the deduction for home equity debt 
• Repealing the Pease provision, which phased down itemized deductions for high-income taxpayers • Lowering the threshold for deducting out-of-pocket medical expenses from 10% of adjusted gross income (AGI) to 7.5% of AGI 
• Separating the tax-rate thresholds for capital gains and dividend income from the tax brackets for ordinary income for high-income taxpayers 
• Raising the exemption levels for the alternative minimum tax (AMT) 
• Doubling the estate tax exemption 
• Removing the penalty for the Affordable Care Act’s (ACA’s) individual mandate 
• Changing the measure used for inflation indexing from the Consumer Price Index for All Urban Consumers (CPI-U) to the chained CPI-U¹ 
   

How the Tax Cut and Jobs Act changed corporate taxes 

Major provisions of the TCJA that impacted corporate income taxes include: 

• Eliminating the graduated corporate rate schedule and reducing the top corporate tax rate from 35% to 21% 
• Repealing the corporate AMT 
• Expanding bonus depreciation to 100% for five years 
• Doubling the Section 179 expensing limit • Limiting the amount of net business interest a business can deduct 
• Limiting the deduction for net operating losses to 80% of taxable income 
• Repealing carrybacks of losses for most businesses but allowing taxpayers to carry forward losses indefinitely 
• Eliminating the domestic production activities deduction 
• Creating a new deduction for owners of pass-through businesses 
• Changing the treatment of foreign source income for U.S. multinationals²
   

Most people can expect to pay more in federal income taxes by 2026 - The Tax Foundation

When does the Tax Cuts and Jobs Act expire? 

Unless Congress passes new legislation, certain specific provisions within the Tax Cuts and Jobs Act expire December 31, 2025. 

Now, let’s discuss which Tax Cuts and Jobs Act provisions expire. 

Expiring corporate tax provisions 

Many of the TCJA’s changes to corporate taxes were permanent, meaning they will only expire or change if Congress passes new tax reform legislation.

Section 199A 

One notable exception is the pass-through business deduction, also known as the Section 199A deduction. During the Congressional debate over the TCJA, owners of pass-through businesses argued that they should receive tax rates similar to the corporate tax rate reduction. In response, Congress created the Section 199A deduction, which allows owners of pass-through businesses—sole proprietors, partners, LLC members, and S corporation shareholders—to deduct up to 20% of qualified business income from their taxable ordinary income³. Unless Congress acts to extend it, the Section 199A deduction will go away in 2026. 

Expiring personal tax provisions 

Many of the TCJA’s changes to individual income tax rates and rules will expire on December 31, 2025. At that point, they will revert to pre-TCJA levels (indexed for inflation). Let’s look briefly at some critical provisions expiring at the end of 2025. 

Tax brackets

Income tax brackets will revert to pre-TCJA levels, with the top individual tax bracket increasing to 39.6% from 37%. As a result, many wealthier clients can expect a measurable increase in their effective tax rate. 

Standard deduction

The standard deduction will also revert to pre-TCJA levels for all filing statuses, resulting in a tax increase for most people. • Personal exemptions. Personal exemptions will return and be adjusted for inflation. This will benefit all taxpayers—particularly those with several dependents.

Child Tax Credit

The CTC will revert to its pre-TCJA structure, with the maximum credit falling from $2,000 to $1,000. The credit’s phaseout threshold will also drop from $200,000 for unmarried taxpayers ($400,000 if married filing jointly) to $75,000 single / $110,000 married filing jointly. As a result, more middle-class parents will lose their ability to claim the credit. 

Credit for other dependents

The other dependent credit (ODC) will expire, so taxpayers with dependents who don’t qualify for the CTC will lose this $500 credit. 

Moving expense deduction

All eligible taxpayers will be able to claim an above-the-line deduction for moving expenses. This adjustment to income was only available to members of the Armed Forces under the TCJA. 

State and local taxes.

The $10,000 SALT cap will expire, so all taxpayers who itemize will be able to deduct all eligible state and local income taxes or sales taxes and property taxes. 

Mortgage interest

The cap on mortgage interest will increase to $1 million of combined acquisition debt, regardless of when the debt was incurred. Interest on the first $100,000 of home equity debt will also be deductible, regardless of how the proceeds were used. 

Miscellaneous itemized deductions

Taxpayers who itemize deductions will be able to deduct miscellaneous itemized deductions that disappeared under the TCJA, including unreimbursed employee expenses and tax preparation fees, as long as they exceed 2% of AGI. 

Limit on itemized deductions

The Pease limitation will return, limiting itemized deductions for taxpayers with AGI above certain thresholds. High earners could see their total itemized deductions reduced by up to 80%. 

Alternative minimum tax

The AMT exemption and exemption phaseout will revert to pre-TCJA levels and adjusted for inflation. As a result, more middle-class households will have to pay the AMT. 

Estate and gift taxes

The estate and gift tax lifetime exclusion amount will drop from $10 million per decedent to $5 million (adjusted for inflation)⁴. 

This is just a summary of some of the more commonly used tax provisions that will be impacted by sunsetting TCJA. While the impact will vary by client and depends on their unique tax situation, the Tax Foundation confirms that “most people can expect to pay more in federal income taxes by 2026⁵.” 

Navigating the maze of tax code changes

Of course, Congress is no stranger to last-minute legislation, and there's chatter about extensions, adjustments, or even making some of these changes permanent. For example, in January 2024, a bipartisan group of lawmakers unveiled the proposed Tax Relief for American Families and Workers Act. This bill would temporarily enhance the Child Tax Credit and return 100% bonus depreciation through 2025. 

Choose CPE courses to keep you up to date on Tax Cut and Jobs Act Changes 

While tax professionals can’t predict the future, staying informed about the latest tax legislation changes can help you guide your clients through the uncertainty. 

So, how do you stay ahead in this ever-changing landscape? Becker has a team of tax experts to help you make sense of confusing changes and sudden updates. Make sure you have the instruction and insight you need to advise and assist your clients with a Prime CPE subscription. You'll have access to over 700 self-study CPE courses and 1,000 webcasts taught by experienced instructors. With the latest updates, insights, and strategies, you can stay informed and help your clients get ahead of the game. 

Don't let the potential expiration of the TCJA catch you or your clients off guard. Dive into the resources offered by Becker CPE and begin planning.