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Several Tax Cuts and Job Act Provisions May Expire After 2025

S.J. Steinhardt
Published Date:
Mar 19, 2024

iStock-897796656 Tax Cuts and Jobs Act

While the Tax Cuts and Jobs Act (TCJA) of 2017 contained many new provisions affecting individuals and business entities, both groups will see changes after 2025 unless Congress acts, CPA Practice Advisor reported, in a roundup of significant TCJA tax provisions that are due to expire. It noted that, with some exceptions, many of the provisions for individuals are scheduled to expire, while most changes for businesses are permanent. Below are some of the major provisions for individuals that are set to expire.

One is marginal tax rates, seven of which were modified in the graduated income tax rate structure. The top income tax rate was reduced from 39.6 percent to 37 percent, while the income ranges for each rate are adjusted annually for inflation. Unless Congress acts otherwise, the current rates will revert to the levels of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent in 2026.

The standard deduction was raised from $6,000 to $12,000 for single filers and $12,000 to $24,000 for joint filers. The deduction for 2024 is $14,600 for single filers and $29,200 for joint filers. The standard deduction is slated to return to pre-TCJA levels in 2026.

Previously, taxpayers could claim personal exemptions for themselves, their spouses and each qualified dependent. The TCJA suspended all personal exemptions for 2018 through 2025.

Another change affects itemized deductions. Under the so-called Pease rule, itemized deductions for high-income taxpayers above an adjusted gross income (AGI) threshold were reduced by three percent of the excess (capped at no more than 80 percent of the deductions). For 2018, the threshold would have been $267,000 for single filers and $320,00 for joint filers. The TCJA suspended the Pease rule, but it is scheduled to return in 2026.

The TCJA enhanced the Child Tax Credit (CTC) in several ways, including an increase in the basic credit from $1,000 to $2,000 and an addition of a $500 credit for non-child dependents. Up to $1,400 of the $2,000 CTC was refundable.  The rules are set to revert to the pre-TCJA structure in 2026 with a $1,000 credit. The extra $500 credit for non-child dependents will expire.

Deducting job-related moving expenses, using a two-part test involving distance and time, was suspended by the TCJA, except for qualifying military personnel on active duty. Now the previous rules are set to be reinstated in 2026.

Charitable contributions can be deducted by itemizers within limits. The annual deduction for monetary gifts was limited to 50 percent of AGI before the TCJA increased the level to 60 percent of AGI, but is scheduled to return to the 50 percent limit in 2026.

State and local tax (SALT) payments used to be fully deductible, but were capped at $10,000 annually for the period spanning 2018 through 2025. The U.S. House of Representatives recently blocked a bill that would have temporarily increased the cap. If Congress does not take any further action, the current $10,000 annual cap will be removed in 2026.

The alternative minimum tax (AMT), a separate tax calculation that is paid only if the result exceeds regular income tax liability, saw its exemption amount increased and the phase-out of its exemption for high-income taxpayers reduced in 2018. These enhancements will expire after 2025.

The TCJA limited the amount of mortgage interest that taxpayers could deduct to payment on the first $750,000 of acquisition debt, reduced from $1 million. The TCJA also suspended the deduction available on the first $100,000 of home equity debt. After 2025, the prior rules will be reinstated.

Under prior law, deductions were allowed for the annual total of casualty and theft losses exceeding 10 percent of AGI, after subtracting $100 per event. The TCJA limited the deduction to casualty losses sustained in a federally declared disaster area and suspended all others. After 2025, the previous rules, including the 10 percent of AGI limit, will be reinstated.

Previously, miscellaneous expenses above 2 percent of AGI, such as unreimbursed employee business expenses and income production expenses, were deductible. This deduction was suspended from 2018 through 2025, but it will be revived by the TCJA in 2026.

Previously, a special tax code provision allowed for a tax exclusion for moving expense reimbursements provided by employers to employees. The TCJA suspended this benefit, except for qualified military personnel, in 2018. It is scheduled to be reinstated in 2026.

The TCJA created a new 20 percent deduction based on qualified business income (QBI) to benefit owners of pass-through entities and self-employed individuals. Without congressional action, the QBI deduction will end after 2025.

The TCJA doubled the first-year “bonus depreciation” deduction, from 50 percent to 100 percent, and it included a gradual phase-out of the deduction over a period of five years. Currently, the phase-out is set to be completed in 2026, not 2025.

The TCJA authorized a new tax credit for wages paid to employees while on family or medical leave. This Employer Credit for Paid Family and Medical Leave is generally equal to 12.5 percent of wages if an employee is paid 50 percent of normal wages while on leave, increasing to a maximum of 25 percent for higher payment amounts. Originally scheduled to expire in 2019, it has been extended through 2025.

The estate tax exemption for each decedent was raised from $5 million in 2017 to $10 million in 2018, with inflation indexing. The exemption for 2024, $13.61 million, is scheduled to revert to $5 million, plus inflation indexing, in 2026.