ST. CROIX INSIGHTS

10 Key TCJA Changes Set to Expire

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Close up of a Tax return form with calculator

The Tax Cuts and Jobs Act (TCJA) was implemented at the end of 2017. It marked the most significant federal tax overhaul in over three decades. Many provisions affecting individuals under the TCJA are slated to expire after 2025.

Here’s a look at the 10 key TCJA changes set to expire:

  • Individual Tax Rates: The TCJA introduced new tax rates for individuals, including a reduced top rate of 37%, down from the previous 39.6%, along with lower rates for other brackets. These rates are expected to return to their pre-TCJA levels in 2026.
  • Standard Deduction: The TCJA substantially increased standard deduction amounts and indexed them for annual inflation. For the tax year 2024, the standard deduction is $14,600 for single filers and $29,200 for joint filers. However, these amounts are set to decrease significantly after 2025.
  • Personal Exemptions: Before the TCJA, individuals could claim personal exemptions for themselves, their spouse (if married), and each qualified dependent. However, the TCJA suspended these exemptions for the tax years 2018-2025.
  • Alternative Minimum Tax (AMT): The TCJA included enhancements to the individual AMT, such as increased exemption amounts, resulting in fewer taxpayers being affected by it. However, these benefits are set to expire after 2025.
  • Child Tax Credit (CTC): The TCJA raised the CTC from $1,000 to $2,000 and added a $500 credit for non-dependents. These TCJA changes will revert to prior law after 2025.
  • State and Local Tax (SALT) Deductions: Previously, SALT payments were fully deductible for itemizers, but the TCJA capped this deduction at $10,000 for the tax years 2018 through 2025. The cap will be eliminated in 2026.
  • Moving Expenses: The TCJA suspended deductions for job-related moving expenses for most taxpayers for the tax years 2018-2025, except for military personnel on active duty.
  • Mortgage Interest: The TCJA lowered the ceiling for mortgage interest deductions and suspended the deduction for home equity debt. These changes will revert after 2025.
  • Casualty Losses: Under the TCJA, deductions for personal casualty and theft losses were restricted to those incurred in federal disaster areas for the tax years 2018-2025. The previous rules will be reinstated in 2026.
  • Miscellaneous Expenses: Itemizers could previously deduct various miscellaneous expenses, but this deduction was suspended for the tax years 2018-2025.

Regarding business provisions, while most were made permanent under the TCJA, some are set to expire:

  • The deduction for qualified business income (QBI) for pass-through entities and self-employed individuals will end after 2025.
  • The first-year bonus depreciation, initially doubled from 50% to 100%, is subject to a phase-out through 2026.
  • The credit for family and medical leave paid to employees was extended through 2025.
  • Current deductions for excess business losses for taxpayers other than C corporations are disallowed through 2028.

Additionally, the federal estate tax exemption was doubled under the TCJA but is scheduled to revert to previous levels after 2025. For 2024, the exemption is $13.61 million per individual, meaning that in 2026 the exemptions might be around $7 million for individuals and $14 million for married couples.

It’s important to note that with the fall 2024 election, Congress may extend or modify some of these provisions.

 

The Tax Cuts and Jobs Act (TCJA) was implemented at the end of 2017. It marked the most significant federal tax overhaul in over three decades. Many provisions affecting individuals under the TCJA are slated to expire after 2025.

Here’s a look at the 10 key TCJA changes set to expire:

  • Individual Tax Rates: The TCJA introduced new tax rates for individuals, including a reduced top rate of 37%, down from the previous 39.6%, along with lower rates for other brackets. These rates are expected to return to their pre-TCJA levels in 2026.
  • Standard Deduction: The TCJA substantially increased standard deduction amounts and indexed them for annual inflation. For the tax year 2024, the standard deduction is $14,600 for single filers and $29,200 for joint filers. However, these amounts are set to decrease significantly after 2025.
  • Personal Exemptions: Before the TCJA, individuals could claim personal exemptions for themselves, their spouse (if married), and each qualified dependent. However, the TCJA suspended these exemptions for the tax years 2018-2025.
  • Alternative Minimum Tax (AMT): The TCJA included enhancements to the individual AMT, such as increased exemption amounts, resulting in fewer taxpayers being affected by it. However, these benefits are set to expire after 2025.
  • Child Tax Credit (CTC): The TCJA raised the CTC from $1,000 to $2,000 and added a $500 credit for non-dependents. These TCJA changes will revert to prior law after 2025.
  • State and Local Tax (SALT) Deductions: Previously, SALT payments were fully deductible for itemizers, but the TCJA capped this deduction at $10,000 for the tax years 2018 through 2025. The cap will be eliminated in 2026.
  • Moving Expenses: The TCJA suspended deductions for job-related moving expenses for most taxpayers for the tax years 2018-2025, except for military personnel on active duty.
  • Mortgage Interest: The TCJA lowered the ceiling for mortgage interest deductions and suspended the deduction for home equity debt. These changes will revert after 2025.
  • Casualty Losses: Under the TCJA, deductions for personal casualty and theft losses were restricted to those incurred in federal disaster areas for the tax years 2018-2025. The previous rules will be reinstated in 2026.
  • Miscellaneous Expenses: Itemizers could previously deduct various miscellaneous expenses, but this deduction was suspended for the tax years 2018-2025.

Regarding business provisions, while most were made permanent under the TCJA, some are set to expire:

  • The deduction for qualified business income (QBI) for pass-through entities and self-employed individuals will end after 2025.
  • The first-year bonus depreciation, initially doubled from 50% to 100%, is subject to a phase-out through 2026.
  • The credit for family and medical leave paid to employees was extended through 2025.
  • Current deductions for excess business losses for taxpayers other than C corporations are disallowed through 2028.

Additionally, the federal estate tax exemption was doubled under the TCJA but is scheduled to revert to previous levels after 2025. For 2024, the exemption is $13.61 million per individual, meaning that in 2026 the exemptions might be around $7 million for individuals and $14 million for married couples.

It’s important to note that with the fall 2024 election, Congress may extend or modify some of these provisions.