TCJA Tax Cuts Ending in 2025

Passing key tax legislation will be a key priority for the next Congress. Without it, several provisions in the tax code will sunset at the end of 2025.

President-elect Donald Trump proposed several tax cuts during his campaign. Republicans will have control of the Senate in 2025. Though several races have yet to be called, the Republicans are on track to also control the House of Representatives, according to the Associated Press (at least as of lunchtime today).

This means that more tax cuts are likely. What is unknown is how much the debt hawks in Congress will push back during negotiations and voting. Additionally, the specific rates, deductions, caps, phaseout levels and credits that are revised will impact your taxable income.

Here are key provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 that are set to expire at the end of 2025 and impact many individual investors.

• Marginal tax brackets: The tax rates for the second and third tax brackets, where many taxpayers fall, will rise by three percentage points (from 12% and 22% to 15% and 25%, respectively) without new legislation. In addition, the thresholds at which each higher bracket is reached will decline if not extended.

• Capital gains and qualified dividends: These were assigned their own income brackets by the TCJA. They are scheduled to revert to using the less generous income tax brackets in 2026.

• Standard deduction: This was doubled by the TCJA. It is now $29,200 for married couples filing a joint return and $14,600 for single filers. Next year, it will be $30,000 and $15,000, respectively. If not extended, it will be cut in half in 2026 on an inflation-adjusted basis.

• Personal exemption: It has been in hibernation since 2018 but could return in 2026. The same applies to the ability to deduct miscellaneous itemized deductions exceeding 2% of adjusted gross income (AGI). For the typical taxpayer, the return of both will not exceed the value of the higher standard deduction.

• State and local tax (SALT) deduction: This may well be a point of contention in negotiations. The $10,000 cap on deducting state and local taxes on federal tax returns will end after December 31, 2025. The current cap was not indexed to inflation by the TCJA. Legislators from areas affected by the SALT deduction limit are being pressured by their constituents to end it, though legislators from other states may object.

• Estate taxes: The TCJA doubled the basic exclusion amount for estate taxes. It is currently $13.61 million per spouse and will rise in 2025 to $13.99 million. The estate exemption will be cut in half (though adjusted for inflation) in 2026 without congressional action.

• Alternative minimum tax (AMT): Both income exemptions and phaseout levels were increased by the TCJA. They are set to revert to the lower pre-TCJA levels (adjusted for inflation) in 2026.

Your total taxable income matters, and the effective tax rate you pay on it matters more than the headline tax numbers you hear about on the news. This makes tax planning beyond 2025 tricky. If you prefer a certain level of certainty, here are actions you can take this year and next year:

• Do Roth individual retirement account (IRA) conversions this year and in 2025 while keeping an eye on your marginal tax brackets and 2026–2027 Medicare Part B premium thresholds (“IRMAA”).
• Take a withdrawal from inherited IRAs subject to the 10-year rule this year even though there is no penalty for not doing so. Penalties will be levied for failing to take a required minimum distribution (RMD) from such IRAs in 2025.
• Make gifts to heirs this year and next year if your estate will be subject to the estate tax. The gift tax exclusions are currently $18,000 for single filers and $36,000 for consenting couples. These limits will rise to $19,000 and $38,000, respectively, in 2025.
• Moving assets to trusts to reduce the size of one’s estate may also be an option for some. Consider the costs and limitations before doing so.
• Bundling charitable donations into this year or next may allow to you claim a higher deduction than the standard deduction.