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The Tax Cuts and Jobs Act of 2017 (TCJA) included some major changes to the tax law, with a number of them set to expire on December 31, 2025. Congress may extend some or all of those provisions, but given the uncertainty of extensions, now is a good time to look at some of the more significant provisions and assess how a 2025 TCJA sunset could affect you.
Individual Tax
Tax rates: The TCJA lowered marginal tax rates for most individual tax brackets. After a 2025 sunset, those rates may return to previous levels. Current TCJA rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%, depending on taxable income. Rates after the sunset would become 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, respectively.
Standard deduction: The standard deduction was nearly doubled for all filing statuses by the TCJA, causing a number of taxpayers to use the standard deduction rather than itemized deductions. Starting in 2026, the standard deduction would be approximately half what it is currently, adjusted for inflation.
Itemized deductions: Under TCJA, the state and local tax deduction was capped at $10,000. After 2025, this cap would expire, allowing greater amounts of real estate, state and local, and personal property taxes to be deducted. Mortgage interest was limited under TCJA to $750,000 of debt for any loans after 12/16/17, and home equity loan interest deductions were suspended. In 2026, interest deductions would revert to limits of $1 million of home mortgage debt and $100,000 of home equity debt. TCJA also eliminated most miscellaneous itemized deductions, including investment fees and unreimbursed employee expenses. In 2026, these deductions would again be allowed to the extent they exceed 2% of the taxpayer’s adjusted gross income.
Personal exemptions: TCJA suspended the deduction for personal exemptions. After 2025, the personal exemption rules would return, allowing $2,000 per taxpayer and qualified dependents (subject to a phase-out for higher income levels).
Business Tax
Qualified Business Income (QBI) 20% deduction: Owners of a passthrough business, such as partnerships and S corporations, as well as sole proprietorships, may currently claim a deduction of up to 20% of QBI (subject to certain limitations). Beginning in 2026, the QBI deduction would no longer be available.
Bonus depreciation on qualified property: The Code allows an additional first-year depreciation deduction equal to a certain percentage of the cost basis of qualified property placed in service during the year. TCJA changed the percentages and what is considered qualifying property. Percentages are based on when property is placed in service and include 100% (for property placed in service from 9/28/17 to 12/31/22), 80% for 2023, 60% for 2024, 40% for 2025, and 20% for 2026. After 2026, bonus depreciation is set to expire.
Estate and Gift Tax
Estate and gift tax exclusion: The TCJA effectively doubled the estate and gift tax exclusion from $5,490,000 per person in 2017 to $11.18 million in 2018, and adjusted the exclusion amount for inflation each subsequent year. The 2024 exclusion amount is $13.61 million per person. In 2026, this exclusion is currently subject to revert to $7 million per person. Taxpayers with significant estates above the lower 2026 exclusion amount should consult with their advisors soon to consider taking advantage of the higher TCJA exclusion amounts by making gifts before the end of 2025.
Congress may enact extensions of some of these provisions. Currently, Congressional leaders are working on a bipartisan bill that would extend a number of expired tax breaks, including revival of 100% bonus depreciation. The Marston Group, PLC will keep you apprised of developments in these areas.
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