When 2025 draws to a close, so will many of the sweeping Trump-era GOP tax breaks established by the Tax Cuts and Jobs Act (TCJA) of 2017. While the legislation made some tax cuts to corporate profit permanent, lowered individual tax rates will expire on Dec. 31, 2025, and will revert to pre-TCJA levels.
Largely dependent on which party ends up controlling the White House and Congress after Inauguration Day 2025, changes to the tax code are coming. Whether cuts can be kept by Republicans, rates rewritten by Democrats or a divided government will agree on some sort of bipartisan compromise, taxpayers of every political persuasion will be affected.
In an editorial on RealClearPolitics, Julio Gonzalez, CEO and Founder of Engineered Tax Services, Inc., warns of a “harsh reality” facing Congress.
“We are in a situation in which many American families and businesses are hanging on by a thread. Letting the non-permanent provisions of the TCJA expire could be catastrophic to our overall economy and the well-being of many working families,” stated Gonzalez.
The TCJA spawned a bunch of changes to the tax code, but here are three key tax adjustments that you’ll need to consider before they turn back at the end of 2025.
Income Tax Rates
Although it kept seven income brackets, the TCJA lowered tax rates across the board and restructured bracket spans, making them more agreeable under the TCJA. With the exception of those who were at 10% (those making $11,000 or less) and 35% (those earning $231,251 to $578,125) tax rate levels prior to 2018, all income tax rates decreased when the new laws came into effect.
The top individual tax rate dropped from 39.6% to 37% under the terms of the Tax Cuts and Jobs Act (single filers making $578,126 and over), the 33% bracket fell to 32% ($182,101-$231,250), the 28% bracket to 24% ($95,376-$182,100), the 25% bracket to 22% ($44,726-$95,375) and the 15% bracket to 12% ($11,001-$44,725).
These bracket backslides will mean that every American will need to reassess their spending and tax returns to pay 1% to 4% more in personal taxes unless provisions are extended, revised or made permanent over the next 28 months.
Under the Tax Cuts and Jobs Act for the tax years beginning after December 31, 2017, and before January 1, 2026, the standard deduction was nearly doubled for all filing statuses. This led to fewer people itemizing deductions and instead opting for the standard deduction.
The TCJA significantly changed the standard deduction amounts for individuals and families. The standard deductions before the 2017 Tax Year were $6,350 for single filers, $9,350 for heads of household and $12,700 for those married filing jointly.
After the TCJA (2018-2025 tax years), these amounts jumped dramatically. The standard deductions for the 2023 tax year are $13,850 for those single or married filing separately, $27,700 for those married filing separately and surviving spouses and $20,800 for heads of household.
This change aimed to simplify the tax filing process for many individuals and families (Forbes estimates that 90% of taxpayers choose to claim the standard deduction). Claiming the standard deduction made it possible for many to skip the complicated process of itemizing deductions and potentially reduce taxable income.
Estate Tax Exemptions
American taxpayers with considerable estates benefit from larger exemptions, and because this tax can have a significant effect on your beneficiaries, it’s best to plan ahead for it in your estate plan if you think your estate may trigger it.
The TCJA doubled the estate and gift tax exemption for individuals, from $5.49 million in 2017 to $11.18 million in 2018. Adjusted for inflation, the exemption was $12.06 million in 2022 and it increased to $12.92 million in 2023. This means that an individual can now pass on up to $12.92 million in assets without being subject to federal estate or gift taxes. For married couples, this effectively allows a combined exemption of $25.84 million.
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