TCJA Expiring Provisions: Key Tax Changes to Watch

These expirations could lead to higher tax rates, reduced deductions, and shifts in tax benefits that have been in place since 2018. Understanding these changes is crucial for taxpayers planning beyond 2025.

With key elements of the TCJA sunsetting, income tax rates, deductions, and credits will see significant revisions. Tracking these changes can help individuals and businesses prepare for potential tax increases or reduced benefits.

Individual Rate Adjustments

The Tax Cuts and Jobs Act (TCJA) lowered individual income tax rates across multiple brackets, easing the tax burden for many households. These lower rates expire at the end of 2025, meaning tax brackets will revert to pre-TCJA levels unless Congress intervenes.

For example, the current 12% bracket, which applies to taxable income up to $94,300 for married couples filing jointly in 2024, would revert to 15%. The 22% bracket, covering income up to $201,050 for joint filers, would rise to 25%. The highest marginal tax rate, reduced from 39.6% to 37%, will return to 39.6%. These changes will result in higher withholding from paychecks and potentially larger tax bills.

Beyond rate increases, income thresholds for each bracket will also shift. The TCJA adopted the Chained Consumer Price Index (C-CPI) for inflation adjustments, which grows more slowly than the traditional Consumer Price Index (CPI). If the law reverts, tax brackets will likely rise faster, pushing more income into higher brackets over time.

Standard Deduction Adjustments

The TCJA significantly increased the standard deduction, simplifying tax filing for millions by reducing the number of people who itemize deductions. This higher deduction amount expires after 2025, lowering it to pre-TCJA levels.

For the 2024 tax year, the standard deduction is $29,200 for married couples filing jointly and $14,600 for single filers. If not extended, the deduction will drop to roughly half these amounts, adjusted for inflation. Many filers who stopped itemizing may need to reassess whether deductions such as mortgage interest, medical expenses, and charitable contributions make itemizing worthwhile again.

A lower standard deduction would also coincide with the return of personal exemptions, which were eliminated under the TCJA. Before 2018, taxpayers could claim a personal exemption for themselves and their dependents, reducing taxable income. If reinstated, the impact on tax liability would vary depending on family size and income.

SALT Deduction Limit

The cap on state and local tax (SALT) deductions, introduced by the TCJA, expires after 2025. Since 2018, the deduction for state income taxes, property taxes, and certain local taxes has been limited to $10,000 for single filers and married couples filing jointly.

If the limit expires, taxpayers who itemize deductions will again be able to deduct the full amount of their state and local tax payments. A married couple in New York paying $25,000 in combined state income and property taxes would see an additional $15,000 in deductions, lowering their federal tax bill.

The expiration of the cap could also affect real estate markets. Property values in high-tax states saw slower growth after 2018 as buyers factored in the increased federal tax cost of owning expensive homes. Restoring the full deduction could boost demand in these areas.

Child Tax Credit Changes

The TCJA temporarily expanded the Child Tax Credit (CTC), increasing its value and making it more accessible to families. Unless Congress acts, the credit will revert to pre-TCJA rules after 2025, reducing the maximum amount per child and tightening eligibility.

Currently, the credit provides up to $2,000 per qualifying child under age 17, with up to $1,600 refundable for lower-income families. When the TCJA provisions expire, the credit is expected to decrease to $1,000 per child, and refundability will be significantly restricted.

Income phaseouts will also change. Under current law, the credit begins to phase out for single filers earning more than $200,000 and married couples earning over $400,000. If pre-2018 rules return, these thresholds will drop to $75,000 for single filers and $110,000 for joint filers, meaning many middle- and upper-middle-class families will see a reduction or complete loss of benefits.

Estate and Gift Tax Threshold

The TCJA significantly increased the federal estate and gift tax exemption, allowing individuals to transfer more wealth tax-free. This higher exemption expires after 2025, reverting to pre-TCJA levels.

Currently, the exemption stands at $13.61 million per individual in 2024, meaning a married couple can shield up to $27.22 million from estate and gift taxes. If the law sunsets, the exemption will drop to approximately $6 million per person, adjusted for inflation, exposing more inherited wealth to the 40% federal estate tax rate.

For high-net-worth individuals and families, this reduction could lead to increased tax liabilities on inherited assets. Business owners passing down companies may face liquidity challenges if a significant portion of their estate becomes taxable, potentially forcing asset sales to cover tax obligations. Those who take advantage of the current exemption before it decreases will not be penalized retroactively, as confirmed by IRS regulations.

Qualified Business Income Deduction

The TCJA introduced the Qualified Business Income (QBI) deduction, allowing owners of pass-through entities—such as sole proprietorships, partnerships, and S corporations—to deduct up to 20% of their qualified business income. This deduction is scheduled to expire at the end of 2025.

The QBI deduction has been particularly valuable for businesses that do not pay corporate income tax, effectively lowering the top marginal tax rate for many pass-through entities. If the deduction expires, business owners will face higher effective tax rates, reducing after-tax profits. Those in service-based industries—such as law, accounting, and consulting—who already face stricter eligibility rules may be particularly affected.

Bonus Depreciation Adjustments

The TCJA allowed businesses to immediately deduct 100% of the cost of qualifying assets, such as machinery, equipment, and certain improvements, through bonus depreciation. This provision is already phasing out, with the deduction dropping to 80% in 2023 and continuing to decline by 20 percentage points each year until it fully expires in 2027.

For capital-intensive industries, such as manufacturing, construction, and transportation, the loss of full expensing could impact investment decisions and cash flow. Companies that have relied on immediate write-offs to reduce taxable income may need to reassess capital expenditures and financing strategies. The phaseout also affects real estate investors who have used bonus depreciation for property improvements.

Corporate AMT Revival

The TCJA repealed the corporate alternative minimum tax (AMT), which previously required businesses with significant deductions and credits to pay a minimum level of tax. If the provision is not extended, the corporate AMT could return.

Before its elimination, the corporate AMT applied a 20% minimum tax rate to businesses with substantial deductions, limiting their ability to reduce taxable income through credits and depreciation. A reinstatement would primarily affect capital-intensive industries and multinational corporations that utilize foreign tax credits and accelerated depreciation. Companies may need to adjust their tax strategies to account for potential AMT liabilities.