The Tax Cuts and Jobs Act of 2017 (TCJA) was the largest overhaul of the tax code in three decades. When it took effect on January 1, 2018, it brought significant changes to income tax planning. While the legislation made certain tax cuts to corporate profit permanent, most of the individual tax provisions in the act will no longer be effective after the TCJA expiration date, which is set at midnight on December 31, 2025.
In this article, we’ll explore the specific tax changes that are set to expire. We will also help you understand what tax brackets will look like after they revert to pre-TCJA levels.
Which provisions of the TCJA are expiring?
The TCJA changed the structure of individual income tax. This was achieved by implementing the following:
- Lower rates
- Wider brackets
- Larger standard deductions
- Larger child tax credits
- Limitations on itemized deductions
These changes reduced the average tax burden for typical taxpayers. The reforms also reduced the individual income tax compliance burden by making it more advantageous for most filers to take the standard deduction. This was done by eliminating the complexity of calculating their taxes under the alternative minimum tax.
Expiring TCJA tax reforms
Let’s look closer at the TCJA expiration and the 5 of the tax reforms that will soon expire unless provisions are extended, revised or made permanent over the next several months.
Reduced personal income tax rates
The TCJA adjusted tax bracket thresholds and widths to reduce marriage penalties and reduced five of the seven individual income tax rates. Specifically, it increased the standard deduction from $6,350 to $12,700 for single filers and from $12,700 to $25,400 for married joint filers in 2018, adjusted annually for inflation.
The TCJA also lowered tax rates across the board and restructured bracket spans. Except for those who were at 10% (those making $11,000 or less) and 35% (those earning $231,251 to $578,125) tax rate levels before 2018, all income tax rates decreased when TCJA came into effect.
Limited state and local tax (SALT) deductions
Under TCJA, the SALT tax deduction was capped at $10,000, which significantly impacted taxpayers in high-tax states. When the SALT limitation was enacted, many states responded by implementing a pass-through entity tax (PTET) as a workaround.
The PTET allowed pass-through entities to claim a deduction for these state taxes paid while simultaneously providing a state tax credit for partners to use on their personal tax return. With the SALT limitation going away, the PTET is effectively inoperative. As such, individual taxpayers can soon claim state taxes paid on their itemized deductions once again, and pass-through entities will no longer be able to pay and claim a deduction for the attributable PTE state taxes.
Sec. 199A QBI deduction
The Sec. 199A Qualified Business Income (QBI) deduction allowed taxpayers to claim up to a 20% deduction on their business income, which could include real estate activities. Using the original cost basis for fixed assets under the unadjusted basis in qualified property immediately after acquisition (UBIA) rules was key in determining the overall QBI deduction.
With the Sec. 199A QBI deduction going away after 2025, real estate investors and operators should pay close attention to the timing of making real estate purchases and capital improvements, if possible.
Expanded the child tax credit
The TCJA increased the child tax credit (CTC) from $1,000 to $2,000 per qualifying child, with the maximum refundable portion increased from $1,000 to $1,400 in 2018, adjusted for inflation until it reaches $2,000; lowered the CTC phase-in threshold from $3,000 to $2,500; and lifted the phaseout thresholds from $75,000 to $200,000 for single filers and from $110,000 to $400,000 for married couples filing jointly.
Standard deductions
The TCJA substantially increased the standard deduction. For 2024, the standard deduction is:
- $29,200, for married individuals filing jointly or with a surviving spouse
- $21,900 for heads of households
- $14,600 for unmarried individuals other than surviving spouses and heads of households
- $14,600 for married individuals filing separately
On January 1, 2026, the standard deduction will return to its 2017 amount indexed for inflation.
Charitable contribution deduction
The TCJA increased the amount that can be deducted with respect for cash gifts to public charities to 60% of AGI. On January 1, 2026, the limit for deducting cash gifts to public charities reverts to 50% of AGI.
| Provision Category | Provisions in Category | |||
| Reduced Individual Tax Rates (pre- and post-TCJA single filer rate schedule for 2018) | 10% 15% 25% 28% 33% 35% 39.6% |
$0 $9,525 $38,700 $93,700 $195,450 $424,950 $426,700 |
10% 12% 22% 24% 32% 35% 37% |
$0 $9,525 $38,700 $82,500 $157,500 $200,000 $500,000 |
| Tax Simplification and Base-Broadening |
|
|||
| Family Tax Relief | Doubled the maximum child tax credit to $2,000, increased the maximum refundable amount to $1,400 in 2018, and increased eligibility from joint taxpayers making up to $110,000 to joint taxpayers making up to $400,000. | |||
| Pass-Through Business Tax Changes | 20 percent deduction for certain pass-through business income, new limitation on non-corporate loss deductions. | |||
| Estate Tax Relief | Increased estate tax exemption from $5.6 million single to $11.2 million joint in 2018. | |||
How the reconciliation process shaped the TCJA’s provisions and expiration
The TCJA was passed under “reconciliation,” a special legislative process that Congress uses to advance high-priority fiscal legislation quickly. Reconciliation means a bill cannot be filibustered in the Senate and can pass with a simple majority rather than requiring the support of 60 senators. While the reconciliation process offers an easier route to passing a bill, it also includes restrictions, such as the Byrd Rule.
The Byrd Rule prohibits provisions viewed as “extraneous” to the budget. In other words, reconciliation legislation must be budget-related and cannot include non-budget changes. Without the Byrd Rule, committees receiving reconciliation directives would be able to add unrelated provisions to their legislative recommendations (including provisions that might be difficult to pass under normal circumstances). Importantly, the Byrd Rule also means a reconciliation bill cannot increase the deficit in years outside the 10-year budget window.
In addition to that limit, the budget resolution that allowed the reconciliation process to begin included a self-imposed limit of $1.5 trillion in revenue costs within the 10-year budget window. These budget constraints made compromises necessary when it came to TCJA tax reforms. The bill was amended to stay within the budget rules so that the individual provisions would expire after 2025. In other words, Congress made the individual tax cuts temporary and large rather than permanent but scaled back.
Tax brackets before and after the TCJA
Once the TCJA expires, the tax system will largely revert to its previous structure, placing a higher and more complex tax burden on most people. Starting in 2026, the standard deduction will be about half of what it is currently, adjusted for inflation. That means every American needs to reassess their spending and tax returns to pay 1% to 4% more in personal taxes.
Comparing pre-TCJA and post-TCJA tax brackets:
| Taxable income (2023, single taxpayer) |
Current marginal rate (2018–2025 per TCJA) |
Pre- and post-TCJA marginal rate (scheduled to resume in 2026) |
| $11,000 or less | 10% | 10% |
| $11,001 to $44,725 | 12% | 15% |
| $44,726 to $95,375 | 22% | 25% |
| $95,376 to $182,100 | 24% | 28% |
| $182,101 to $231,250 | 32% | 33% |
| $231,251 to $578,125 | 35% | 35% |
| $578,126 or more | 37% | 39.60% |
Estate lifetime exemption
The federal estate tax exemption is scheduled to be cut in half in 2026. It is currently $13.61 million per individual, and with 2025 inflation adjustments. It will likely be reduced to about $7 million on January 1, 2026.
How BPM can help you navigate the TCJA expiration
Assuming the TCJA expiration as planned next year, there are steps you can take to mitigate potential negative impacts and make the most of the current tax environment.
Navigating the expiring TCJA rules can be complex and challenging. BPM offers comprehensive tax planning and compliance services for both individuals and corporations. Our tax professionals possess deep knowledge of tax law and federal, state and international tax developments and can discuss these and other tailored tax strategies with you to both minimize your tax liabilities and help you save.
To find out how we can help you navigate the expiring TCJA and other tax issues, contact us.
