Major TCJA Tax Provisions Set to Expire: What You Need to Know
The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant tax changes, but many of its provisions were designed to be temporary. As we move through 2025, several key tax benefits are set to expire at the end of the year, potentially affecting individuals, businesses, and estates.
With ongoing discussions around new tax legislation, such as the Big Beautiful Bill, taxpayers should prepare for potential shifts. Let’s break down three major provisions scheduled to sunset: individual tax rates and brackets, the Qualified Business Income Deduction (QBID), and the estate tax lifetime exemption and what you can do now to prepare.
- Individual Tax Rates & Brackets: Potential Increase Ahead
The TCJA reduced individual tax rates across various income brackets, including lowering the top rate from 39.6% to 37%. Unless Congress acts, these rates will revert to their pre-TCJA levels after December 31, 2025.
If that happens, many taxpayers will see an increase in their tax liabilities. Those in higher brackets may feel the impact the most, but even middle-income earners could experience tax hikes. Strategic tax planning, such as recognizing income in 2025 while rates are lower, may help mitigate the impact.
- The Qualified Business Deduction (QBID): A Major Shift for Business Owners
The TCJA introduced the QBID, allowing eligible owners of pass-through businesses like S corporations, partnerships, and sole proprietorships to deduct up to 20% of their qualified business income. This deduction has significantly reduced taxable income for small and medium-sized business owners.
However, this provision is set to expire at the end of 2025, meaning pass-through business owners could see a substantial tax increase starting in 2026. Business owners should monitor legislative developments and explore potential tax strategies to adjust for this change.
- Estate Tax Lifetime Exemption: A Drastic Reduction Coming?
The TCJA temporarily doubled the estate tax exemption, allowing individuals to pass on up to $13.99 million for 2025 (adjusted for inflation) tax-free. Married couples can pass on up to $27.98 million combined. However, without congressional action, the temporary expansion of the exemption will expire this year.
This reduction could expose more estates to federal estate taxes, particularly affecting families with significant assets, business owners, and real estate investors. Those who may be impacted should consider estate planning strategies, such as gifting and trust arrangements, before the exemption decreases.
What’s Next? The Future of TCJA Provisions
As the Big Beautiful Bill makes its way through Congress, there is uncertainty over whether these provisions will be extended, modified, or allowed to expire. While some lawmakers advocate for keeping the tax cuts, debates over fiscal policy and budget constraints may influence the final outcome.
Taxpayers should not wait for last-minute decisions from Congress. Instead, individuals, business owners, and families with sizable estates should proactively plan for potential changes. Consulting with a tax professional can help identify strategies to optimize tax savings before these provisions sunset.
Final Thoughts
With major TCJA provisions set to expire at the end of 2025, now is the time to prepare. Whether it’s higher tax rates, changes for business owners, or a reduced estate tax exemption, taxpayers should take advantage of current opportunities before they disappear.
If you need guidance on how these changes could affect you, Melton & Melton is here to help. Contact our team to develop a customized tax strategy and ensure you’re prepared for what’s ahead.