With Donald Trump winning reelection and Republicans taking control of the Senate, the impending expiration of the Tax Cuts and Jobs Act (TCJA) is now uncertain. There are multiple scenarios that could unfold between now and December 31, 2025. We will leave the predictions to others and focus on the law as it currently stands.
What we do know — absent an extension by Congress, is most of the individual, estate and gift provisions of the 2017 Tax Cuts and Jobs Act will expire at the end of 2025. Among the many provisions subject to the 2025 sunset are:
Marginal Tax Brackets
As an individual’s ordinary taxable income increases, the tax rate on the next level of income also increases. The amount of income at which each bracket starts and stops is indexed for inflation. The current individual marginal tax brackets of 10%, 12%, 22%, 24%, 32%, 35% and 37% will revert to pre-TCJA rates of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Additionally, the brackets become narrower, meaning taxpayers will move through them faster and will reach the higher tax rates at income level lower than under the TCJA.
Personal Exemptions
A personal exemption is an amount a taxpayer was allowed to reduce their taxable income for themselves, a spouse (if married and filing joint) and for each dependent. Under the TCJA, personal exemptions were eliminated. The deduction for personal exemptions will return and be adjusted for inflation for the 2026 tax year. Taxpayers with income above specific thresholds are subject to a phaseout of the personal exemption deduction.
Standard Deduction
The standard deduction is a flat amount that is subtracted from taxable income for taxpayers that do not itemize their deductions and varies based on filing status, age and whether a taxpayer is claimed by another as a dependent. The TCJA doubled the standard deduction. It is currently slated to return to pre-TCJA levels at the end of 2025.
State and Local Tax Deduction
Taxpayers who itemize deductions are allowed to deduct certain state and local taxes (SALT). The TCJA limited this deduction to $10,000 for most taxpayers ($5,000 for married taxpayers filing separate returns). The limitation is scheduled to expire, and taxpayers will again be able to deduct all of their eligible state and local taxes.
Charitable Contributions Deduction
Contributions of cash or property to eligible organizations, including public charities and private foundations, are an itemized deduction that may be claimed as a charitable contribution. Generally, the deduction for charitable contributions is limited to specific amounts of a taxpayer’s adjusted gross income (AGI) depending on the type of property donated and the nature of the receiving organization (e.g., public or private charity). The TCJA increased the limitation for cash donations to public charities from 50% to 60% of AGI. This is scheduled to revert, and cash contributions to public charities will once again be limited to 50% when the TCJA expires for tax year 2026.
