The Tax Cuts and Jobs Act (TCJA), commonly known as the Trump tax cuts, was a major overhaul of the U.S. tax system passed in December 2017. It introduced lower tax rates, higher deductions, and significant business tax incentives. However, many of its provisions for individual taxpayers are set to expire at the end of 2025 unless Congress takes action.
As the expiration date approaches, it’s crucial to understand how these tax changes impact you and what to expect in 2026. In this blog, we’ll break down the key provisions of the TCJA, how they have affected individuals and businesses, and what might happen next.
Key Provisions of the Trump Tax Cuts
The TCJA reduced tax rates and introduced new deductions while limiting certain tax benefits. Here’s a breakdown:
For Individuals:
Lower Tax Rates: The top tax bracket dropped from 39.6% to 37%, with reductions across most income levels.
Higher Standard Deduction: The deduction nearly doubled to $12,000 for single filers and $24,000 for married couples (adjusted for inflation).
State and Local Tax (SALT) Deduction Cap: Taxpayers in high-tax states were limited to a $10,000 deduction for state and local taxes.
Child Tax Credit Expansion: Increased from $1,000 to $2,000 per child, with $1,400 refundable for lower-income households.
Estate Tax Exemption Increase: The exemption doubled to around $12 million per individual, reducing estate tax liability.
For Businesses:
Corporate Tax Rate Cut: Reduced from 35% to 21% permanently.
Pass-Through Business Deduction: Allowed certain small businesses to deduct 20% of their income.
Full Capital Expensing: Businesses could immediately deduct the full cost of new investments instead of depreciating them over time.
What Happens When the Tax Cuts Expire in 2025?
Most individual tax benefits will automatically expire at the end of 2025, meaning:
✔️ Tax rates will return to pre-2018 levels.
✔️ The standard deduction will shrink.
✔️ The SALT deduction cap could be lifted.
✔️ The Child Tax Credit will decrease.
However, corporate tax cuts are permanent, meaning businesses will continue to benefit from the 21% rate.
Impact on Individuals and Families
Higher Tax Bills for Many Households
With the expiration of lower tax rates, many middle-class households will see increased tax liabilities in 2026.
Smaller Deductions and Credits
The standard deduction will decrease, making itemizing more appealing.
The Child Tax Credit will drop, impacting families with children.
The SALT deduction cap removal may help high-income earners in high-tax states.
How Businesses Will Be Affected
Unlike individual tax cuts, business tax benefits remain intact:
✔️ The corporate tax rate stays at 21%.
✔️ Pass-through business deductions may change, depending on congressional action.
✔️ Some tax breaks for capital investment could be phased out.
Small businesses should watch closely for any tax law modifications that might affect deductions and credits.
Possible Scenarios: Will Congress Extend the Tax Cuts?
There are three main possibilities:
Congress Extends the Tax Cuts: Some or all of the expiring provisions could be made permanent.
A New Tax Plan is Introduced: Lawmakers might modify or replace the TCJA with new reforms.
The Tax Cuts Expire: If Congress does nothing, tax rates and deductions will return to 2017 levels.
The political landscape in 2025 will determine which scenario unfolds.
How to Prepare for Tax Changes in 2025
✔️ Stay Updated: Follow tax law changes in Congress.
✔️ Review Your Tax Strategy: If you benefit from current deductions, consult a tax professional about your 2026 tax outlook.
✔️ Maximize Existing Benefits: Take advantage of current tax credits before they expire.
✔️ Consider Itemizing Deductions: If the standard deduction drops, itemizing could be beneficial.
Comparison Chart: Before, During, and After the TCJA
Provision Pre-TCJA (2017) Under TCJA (2024) Post-TCJA (2026)
Top Individual Tax Rate 39.6% 37% 39.6%
Standard Deduction (Single) $6,350 $12,950 (adjusted) ~$6,500 (estimated)
SALT Deduction Cap No cap $10,000 No cap (if expired)
Child Tax Credit $1,000 $2,000 $1,000
Corporate Tax Rate 35% 21% (permanent) 21%
Estate Tax Exemption ~$5.5 million ~$12.9 million ~$5.5 million
Final Thoughts: What’s Next for Taxpayers?
The 2025 tax changes could impact millions of Americans, particularly middle-class families and small businesses. The biggest question remains: Will Congress extend or modify the TCJA, or will tax rates return to pre-2018 levels?
Regardless of the outcome, planning ahead is crucial. Stay informed, consult a tax professional, and take advantage of existing tax benefits while they last.
🔍 Stay tuned for updates on tax changes as Congress debates the future of the TCJA!
📌 Disclaimer: This article is for informational purposes only. Consult a tax expert for personalized advice.
Read More:
