What's Changing in 2025 and 2026: The Critical Tax Provisions Sunsetting, Phasing, and Newly Effective

Tax law is rarely static — but 2025 and 2026 represent an unusually consequential period for U.S. taxpayers. Multiple TCJA provisions sunset at the end of 2025, bonus depreciation continues its phase-down toward elimination, SECURE 2.0 provisions activate, and dozens of inflation-adjusted thresholds shift. Understanding these changes and planning around them is essential for taxpayers in transitional life or business stages.

TCJA Sunset Provisions (December 31, 2025)

Most individual tax provisions of the Tax Cuts and Jobs Act expire at year-end 2025. Without congressional action:

Marginal Tax Rates Revert

Current brackets (10/12/22/24/32/35/37%) revert to pre-TCJA brackets (10/15/25/28/33/35/39.6%). Most middle and upper-middle taxpayers will see 1-3 percentage point rate increases.

Standard Deduction Decreases

The doubled standard deduction reverts to pre-TCJA levels (approximately $16,000 joint, indexed) — partially offset by the return of personal exemptions.

Personal Exemptions Return

Eliminated by TCJA, personal exemptions return at approximately $5,300 per person (inflation-adjusted from pre-TCJA $4,050).

Child Tax Credit Reduction

Drops from $2,000 to $1,000 per child. Income phase-out reduces from $400,000 joint MAGI to $110,000.

Section 199A QBI Deduction Expires

The 20% deduction on qualified business income from pass-through entities expires entirely — eliminating up to 7.4% of effective tax rate reduction on business income.

Estate Tax Exemption Cut Roughly in Half

From approximately $13.99M per person (2025) to approximately $7M (inflation-adjusted from pre-TCJA $5M). The most consequential change for high-net-worth families.

SALT Cap Expires

The $10,000 SALT deduction cap expires. Unlimited state and local tax deductibility returns.

Mortgage Interest Cap Returns to $1M

The TCJA-reduced $750,000 acquisition mortgage cap reverts to $1,000,000. Home equity loan interest restrictions also reverse.

Misc Itemized Deductions Return

The 2% floor miscellaneous itemized deductions return — including unreimbursed employee business expenses, investment management fees, and tax preparation fees.

Bonus Depreciation Phase-Down

Section 168(k) bonus depreciation continues phasing down:

• 2024: 60%.

• 2025: 40%.

• 2026: 20%.

• 2027: 0% (eliminated unless restored).

Multiple legislative proposals continue to push for restoration of 100% bonus depreciation, potentially retroactively.

SECURE 2.0 Provisions Activating in 2025-2026

2025 — Super-Catch-Up for Ages 60-63

Taxpayers ages 60-63 can contribute additional catch-up amounts:

• 401(k)/403(b)/457: $11,250 (vs $7,500 standard catch-up).

• SIMPLE IRA: $5,250.

This four-year window provides significant additional retirement deferral.

2025 — Inherited IRA RMD Enforcement

The 10-year rule for non-spouse beneficiaries under SECURE Act includes annual RMD requirements (in addition to the 10-year final distribution). The IRS has waived enforcement through 2024; full enforcement begins 2025.

2026 — Mandatory Roth Catch-Up for High Earners

Taxpayers with prior-year wages over $145,000 (2025 threshold) must make catch-up contributions on a Roth basis — no longer pre-tax. Originally scheduled for 2024, delayed to 2026.

2025 — Saver's Match (Replacing Saver's Credit)

The Saver's Credit converts to a federal matching contribution paid directly into the taxpayer's retirement account — providing a 50% match on up to $2,000 of retirement contributions, with income-based phase-outs.

Healthcare Provisions

2026 — Workplace Meal Deduction Drops to 0%

The deduction for employer-provided meals on premises (currently 50%) drops to 0% in 2026 unless extended. Tech companies and professional firms providing free employee meals face elimination of this deduction.

HSA Limit Increases

2025 HSA contribution limits: $4,300 self / $8,550 family (plus $1,000 catch-up at 55+).

Premium Tax Credit Enhanced Subsidies

The American Rescue Plan Act extended PTC subsidies above 400% FPL on a sliding scale. Currently extended through 2025 — extension into 2026+ uncertain.

Estate and Gift Tax

2025 — Annual Exclusion Increase

$19,000 per recipient per donor (up from $18,000 in 2024).

2025 — Lifetime Exemption

$13.99M per person (up from $13.61M).

2026 — Lifetime Exemption Cliff

Reduces to approximately $7M per person — making 2025 the last year to use the additional exemption through SLATs, dynasty trusts, GRATs, and other planning vehicles.

Business Tax Provisions

Section 174 R&D Capitalization

Continues unless legislative restoration. Current rules require 5-year amortization of domestic R&D, 15-year amortization of foreign R&D.

Section 179 Limits Increase

2025: $1,250,000 maximum deduction with phase-out beginning at $3,130,000.

Excess Business Loss Limitation

Continues with inflation-adjusted limits ($313,000 single / $626,000 joint for 2025). Currently scheduled to expire after 2028.

1099-K Reporting Threshold

The 1099-K threshold continues stepping down:

• 2024: $5,000.

• 2025: $2,500.

• 2026: $600 (originally scheduled, may be modified).

Energy Credit Provisions Continuing

The IRA-enacted energy credits remain in effect through their scheduled phase-down:

• Residential Clean Energy Credit (§25D): 30% through 2032.

• Energy Efficient Home Improvement Credit (§25C): Up to $3,200/year through 2032.

• Commercial Investment Tax Credit (§48): Through 2024, transitioning to technology-neutral §48E in 2025.

• Production Tax Credit (§45): Through 2024, transitioning to technology-neutral §45Y in 2025.

Beneficial Ownership Information Reporting

Corporate Transparency Act BOI reporting (effective 2024) continues with significant enforcement implications:

• Existing entities had January 1, 2025 deadline.

• New entities have 30-day filing requirement (post-2024 formations).

• Updates required within 30 days of changes.

Continuing litigation has temporarily enjoined enforcement in some jurisdictions; status remains in flux.

State Tax Changes

Multiple states continue tax reform efforts:

• Several states reducing income tax rates.

• Continued expansion of pass-through entity tax (PTET) regimes.

• Sales tax nexus and marketplace facilitator law expansion.

• State estate tax modifications in various states.

Critical Year-End 2025 Planning Moves

For taxpayers facing the TCJA sunset, the most consequential 2025 actions:

1. Estate planning gifts using the higher exemption before sunset (SLATs, dynasty trusts, GRATs).

2. Roth conversions at current marginal rates before potential 2026 rate increases.

3. QBI optimization for pass-through business owners before §199A expires.

4. Income/deduction timing coordinated with rate trajectory.

5. SALT planning review for high-tax-state residents.

6. Business entity review potentially favoring C-corp conversion if §199A disappears.

7. Equipment purchases capturing current 40% bonus depreciation.

Common Mistakes

• Waiting until late 2025 to plan around TCJA sunset (some strategies require months of execution).

• Failing to use the additional estate exemption before 2026.

• Missing SECURE 2.0 super-catch-up opportunities for ages 60-63.

• Underestimating the cumulative impact of multiple sunsetting provisions.

• Not modeling marginal rate scenarios for income/deduction timing decisions.

• Failing to file BOI reports by required deadlines.

• Missing the post-2025 elimination of certain workplace meal deductions in budgeting decisions.

Bottom Line

2025 represents the most consequential tax planning year in recent memory. The combined effect of TCJA sunset, bonus depreciation phase-down, SECURE 2.0 activations, and BOI reporting creates an unusually rich planning landscape — and an unusually expensive cost of inaction. For taxpayers in any of the affected categories (high-net-worth, business owners, retirees, real estate investors), engaging with a CPA on a structured 2025 planning review is among the highest-priority financial decisions available.