Tax Provisions are Expiring After 2025. What Does That Mean for You?

The Tax Cuts and Jobs Act (TCJA) from 2017 provided the most sweeping tax law changes in over 30 years and saved the vast majority of individuals and companies significant taxes. While many of the TCJA tax provisions were made permanent, other provisions will expire at the end of 2025 unless Congress decides to act. These provisions will also add more complexity for taxpayers. The tax cost to extend these expiring tax provisions is projected to be about $3.5-$4 trillion over the next 10 years.

The major tax provisions that will expire at the end of 2025 are as follows:

Individual Tax Provisions

The Individual Tax Rates will increase from 10%/12%/22%/24%/32%/35%/37% to 10%/15%/25%/28%/33%/35%/39.6%.

The Individual Tax Brackets for married filing joint will go back to the single tax brackets. Currently, the married filing joint tax brackets are generally double the single tax brackets. The marriage penalty will be reinstated.

The Standard Deduction will go from $14,600 single/$29,200 married filing joint to $8,300 single/$16,600 married filing joint.

Personal Exemptions will go from $0 to $5,300.

The Child Tax Credit will go from $2,000 (under age 17) plus $500 for a non-qualified child, to $1,000 (under age 17) and no credit for dependents for 17 and over, with lower income phase-out thresholds.

Itemized Deductions will go from no overall limitation to a 3% reduction for high income taxpayers.

The current State Tax Deduction is currently capped at $10,000 and will be gone so all state taxes will be deductible. This includes state income or sales taxes and property taxes.

The Mortgage Interest Deduction limitation on home acquisition debt of $750,000 will go back to $1,000,000. Also, home equity interest will become deductible again up to $100,000 of debt.

The Charitable Contribution limit of 60% of adjusted gross income will go down to 50% for cash contributions to qualified charities.

Miscellaneous Deductions subject to the 2% adjusted gross income threshold will be reinstated. This covers unreimbursed employee expenses, investment/advisory fees, legal fees, and tax preparation fees.

Theft and Casualty Losses will be also allowed. Currently, they can only be deducted if in a federally declared disaster area.

The Moving Expense Deduction will be available to qualifying individuals. Currently, it’s only available for members of the Armed Forces.

The ABLE Account current contribution limit is $18,000 (the annual gift tax exemption) plus the person’s salary or the individual Federal Poverty Level, whichever is less. This will change to only the annual gift tax exemption amount and will not include any of the person’s salary. Also, the onset of a person’s disability currently must be before age 26 but will increase to age 46 in 2026.

The current 20% Qualified Business Income Deduction (QBI) for business income will be eliminated.

The Business Loss Limitation of $305,000 single and $610,000 married filing joint will be eliminated after 12/31/2028.

The Health Insurance Premium Tax Credit will be reduced and have lower income phase-out thresholds.

For Opportunity Zones, there will be no election for the deferral of capital gain after 12/31/2026.

The Alternative Minimum Tax Exemption will currently go from about $85,700 single/$133,300 married filing joint back to about $54,300 single/$84,500 married filing joint (2017 levels) with lower income phase-out thresholds.

Estate Tax Provisions

The Estate Tax Exclusion of $13.61 million per person will go back to about $7.15 million per person.

Business Tax Provisions

Bonus Depreciation will be 20% in 2026 and 0% in 2027.

The Global Intangible Low-taxed Income (GILTI) tax rates will go from 10.5%-13.125% to 13.125%-16.406%.

The Foreign-Derived Intangible Income (FDII) tax rates will go from 13.125% to 16.406%.

The Base Erosion and Anti-abuse tax (BEAT) tax rates will go from 10% to 12.5%.

The C Corporation tax rate of 21% was made permanent.

With the election this fall and the changing political and tax circumstances, it’s important to start planning for these changes as soon as possible. Some of the planning, like getting valuations for gifting or changing a business structure, will take time and careful consideration.

Please contact your tax professional with any questions and to start planning for the upcoming changes.