What Happens When TCJA Expires?

The clock is ticking for small business owners and high-earning individuals—the 2017 Tax Cuts and Jobs Act (TCJA) provisions are set to expire after December 31, 2025. With only a few months remaining, proactive planning is essential to minimize the impact of these significant tax changes.

Individual Tax Rate Increases

When TCJA expires, the seven tax brackets will revert to their pre-2018 levels. The top marginal rate will increase from 37% back to 39.6%. But it's not just high earners affected—rates increase across most brackets:

The 12% bracket returns to 15%. The 22% bracket returns to 25%. The 24% bracket returns to 28%. The 32% bracket returns to 33%. The 35% bracket returns to 35% (unchanged). The 37% bracket returns to 39.6%.

Standard Deduction Reduction

The nearly doubled standard deduction will be cut roughly in half. For 2025, married couples filing jointly can claim approximately $30,000. If TCJA expires, this drops to around $16,500 (adjusted for inflation), plus the return of personal exemptions worth about $5,300 per person.

This change will push many taxpayers back into itemizing, particularly those in high-tax states who will benefit from unlimited SALT deductions.

SALT Deduction Cap Removal

The $10,000 cap on state and local tax (SALT) deductions will disappear. For taxpayers in high-tax states like California, New York, and New Jersey, this could mean thousands in additional deductions. However, the return of the Pease limitation may partially offset this benefit for high earners.

QBI Deduction Elimination

Perhaps the most significant impact for small business owners: the 20% Qualified Business Income deduction under Section 199A will expire entirely. A business owner with $200,000 in qualified business income currently saves approximately $8,000-$14,000 annually from this deduction. That benefit disappears January 1, 2026.

Estate Tax Exemption Cut in Half

The current estate tax exemption of approximately $13.6 million per individual ($27.2 million for married couples) will drop to roughly $7 million per person. Families with significant assets need to review their estate plans immediately.

What You Should Do Now

Consider accelerating income into 2025 to take advantage of current lower rates. Maximize QBI deduction strategies while they still exist. Review your estate plan with qualified advisors. If you're in a high-tax state, understand how SALT changes affect your situation. Consult with your CPA to model both scenarios and develop contingency plans.