The looming expiration of the 2017 Tax Cuts and Jobs Act (TCJA) enacted during the Trump administration has become an important issue in the presidential campaign. Scheduled to sunset in 2025, the TCJA implemented significant changes to the tax code, including the reduction of personal income taxes and a simplified tax filing process.
Former President Donald Trump is in favor of making the TCJA provisions permanent if he were to be elected for a second term. Vice President Kamala Harris has been less clear about her plan for TCJA but has expressed support in extending certain favorable provisions for taxpayers earning less than $400,000. Regardless of who takes office, the sunsetting of the TCJA opens the door for notable tax legislation in 2025.
What Could Change for Individual Taxpayers
The TCJA reduced federal income tax rates, lowering the top rate from 39.6% to 37%. If the sunset moves forward as planned, income tax rates would revert to pre-TCJA levels.
TCJA Tax Rates
| Single Filers | Married Couples Filing Jointly | Tax Rates |
| $0 to $9,950 | $0 to $23,200 | 10% |
| $9,950 to $40,525 | $23,201 to $94,300 | 12% |
| $40,525 to $86,375 | $94, 301 to $201,050 | 22% |
| $86,375 to $164,925 | $201,051 to $383,900 | 24% |
| $164,925 to $209,425 | $383,901 to $487,450 | 32% |
| $209,425 to $523,600 | $487,451 to $731,200 | 35% |
| $523,600 or more | $731,201 or more | 37% |
Pre-TCJA Tax Rates
| Single Filers | Married Couples Filing Jointly | Tax Rates |
| $0 to $9,325 | $0 to $18,650 | 10% |
| $9,325 to $37,950 | $18,650 to $75,900 | 15% |
| $37,950 to $91,900 | $75,900 to $153,100 | 25% |
| $91,900 to $191,650 | $153,100 to $233,350 | 28% |
| $191,650 to $416,700 | $233,350 to $416,700 | 33% |
| $416,700 to $418,400 | $416,700 to $470,700 | 35% |
| $418,400 or more | $470,700 or more | 39.6% |
Personal Exemptions
Personal exemptions would return in 2026 if the TCJA were to sunset. It is anticipated that the deduction would be $5,300 per taxpayer and each dependent.
Standard Deduction
The TCJA nearly doubled the standard deduction for all filing statuses, eliminating the need to itemize for many taxpayers. If TCJA were to sunset, the standard deduction would likely be about half of its current rate of $12,000 for single filers and $24,000 for married couples filing jointly.
Itemized Deductions
The state and local tax (SALT) deduction was capped at $10,000 under the TCJA. If no action is taken, this cap will expire and all state and local property and income taxes will once again be fully deductible.
The return of the home equity interest expense deduction would be another important change for individual taxpayers. Under current law, the deduction is limited to the interest expense on up to $750,000 of “acquisition debt.” If TCJA sunsets, the deduction will be limited to the interest expense on up to $1 million of acquisition debt, as well as $100,000 of home equity debt.
The TCJA also eliminated the miscellaneous itemized deduction, which typically includes investment management and tax preparation fees. This deduction will return if the TCJA sunset moves forward as planned.
Child Tax Credit
With the TCJA sunset, the child tax credit will also revert to $1,000, as opposed to the current $2,000. However, both Trump and Harris have expressed intent to permanently increase this credit.
Estate and Gift Tax
The TCJA nearly doubled the lifetime estate and gift tax exemption from $5.6 million to $11.18 million for individuals, and $25.84 million for married couples. In 2024, this rose to $13.61 for individuals and $27.22 million for couples. Barring congressional action, the exemption will be essentially cut in half and returned to about $7 million per individual.
An increased exemption allowed more high-net-worth individuals to transfer their assets tax-free, and reverting back to pre-TCJA exemption levels will require individuals and families to revisit their estate planning strategies.
What Could Change for Businesses
The most significant change for business under TCJA were the reduction in the C corporation tax rate to a flat 21%, as well as the implementation of the 20% qualified business income (QBI) deduction for partnerships, S corporations and sole proprietorships. Both changes were designed to increase domestic investment and help U.S. companies remain globally competitive.
Although the 21% rate on C corporations was made permanent, the QBI deduction is scheduled to sunset and could be gone after 2025.
Bonus Depreciation
The Act allows businesses to fully expense certain short-lived capital investments, such as machinery and equipment, rather than depreciating them over time. This bonus depreciation deduction began to phase out in 2023, when the 100% depreciation was reduced to 80%. The phase out will continue at a rate of 20% per year until it is fully phased out in 2027.
Net Operating Loss Deduction
Under the TCJA, a business’s net operating loss (NOL) deduction is limited to 80% of its current taxable income. The ability to carryback an NOL for two years was also eliminated, as was the 20-year limit on carryforwards. If this provision is allowed to sunset, an NOL would once again be fully deductible and eligible for the two-year carryback.
Your Guide Forward
Permanently extending the TCJA will cost an estimated $4 trillion through 2034, according to the Joint Committee on Tax and the Congressional Budget Office. Though this would add to the federal deficit, analysts believe it could also boost GDP growth.
While the fate of the TCJA is still uncertain, being aware of potential tax changes and their impact is important for both businesses and individual taxpayers. Cherry Bekaert’s experienced professionals can help you prepare for changing legislation and identify effective tax planning strategies.
