Guest Contributor Article - Tax Changes Coming After 2025
In an effort to bring you new perspectives and information, we have added a guest contributor article to our quarterly newsletter format. We hope to add value by providing topics outside of the financial markets and financial planning that we already cover. This quarter’s article is from Cory Belcher, CPA at Reliant.
Tax Changes Coming After 2025
We are approaching the end of the Tax Cuts and Jobs Act (TCJA), effective years 2018-2025. Which are the most significant expiring provisions?
Standard Deduction
The TCJA increased the standard deduction and eliminated personal exemptions. If the TCJA expires as under current law, the standard deduction for a married couple will be approximately $16,600 in 2026, while the personal exemption will be about $5,300. If this provision of the TCJA were extended through 2026, the standard deduction would be roughly $31,000, and the personal exemption would be zero.
Individual Income Tax Rates
The TCJA lowered marginal income tax rates across the income distribution system. For example, the TCJA cut the top marginal tax rate from 39.6% to 37%. If the TCJA expires, the table of the seven rates will revert to the pre-2017 levels.
State and Local Tax (SALT) Deduction
The TCJA imposed a $10,000 cap on the deductibility of state and local taxes (SALT). If this provision of the TCJA expires, all state and local property taxes and income taxes (or sales taxes in states without income taxes) will be deductible. While this allows higher itemized deductions, it is considered a preference item, which could trigger Alternative Minimum Tax (AMT) for high-income taxpayers.
Child Tax Credit
The TCJA increased the tax credit for each child under 17 from $1,000 to $2,000. The TCJA also increased the income thresholds at which the credit phases out. The child tax credit will fall back to $1,000 if the TCJA expires.
Deduction for Small Business Income
The TCJA provides a 20% deduction for qualified pass-through income (section 199A) for sole proprietorships, partnerships, and S-corporations. Upon expiration, this deduction will cease to exist.
Alternative Minimum Tax (AMT)
The TCJA increased the AMT exemption amounts and raised the income levels at which the exemptions phase out, resulting in fewer taxpayers liable for the AMT. If this provision of the TCJA expires, the 2026 AMT exemption for married couples filing jointly will be about $110,075, compared to about $140,300 if the provision is extended.
Estate taxes
The TCJA doubled the estate tax exemption. If this provision expires the exemption in 2026 will be about $14.3 million for married couples, compared to $28.6 million if the provision is extended.
TCJA - Expiring at the end of 2025 Summary of Projected Table of Changes* | If Extended 2026 | If Expired 2026 |
| Standard Deduction - Single | $15,500 | $8,300 |
| Standard Deduction - Joint Filers | $31,000 | $16,600 |
| Personal/Dependency Exemptions - Per | $0 | $5,300 |
| Capital Gains Rate - Max | 20% | 20% |
| SALT - State and Local Taxes Deductible | Capped at 10,000 | No Limit |
| Mortgage Interest Deduction - Eligible Businesses | $750,000 | $1,000,000 |
| Estate & Gift Tax Limits - Individual | $14,300,000 | $7,150,000 |
| 199A 20% QBI Deduction - Eligible Businesses | Yes | No |
| Child Tax Credit | $2,000 | $1,000 |
| Credit for Other Dependents | $500 | $0 |
| AMT (Alternative Minimum Tax) - # of affected | 200,000 Taxpayers | 5,000,000 Taxpayers |
| The 7 Tax Rate % Shifts | 10,12,22,24,32,35,37 | 10,15,25,28,33,35,39 |
Tax Efficient Moves to Make in 2025 Before the Tax Cuts and Jobs Act Expires
As 2025 approaches, we're staring down the end of the Tax Cuts and Jobs Act (TCJA). With potential changes on the horizon, it's time to think about smart tax strategies you can use now. Here’s a look at some moves you might want to consider before it’s too late.
The 3 Most Impactful Suggestions
1) Accelerate Business income and the directly related QBI deduction – QBI Eligible entities defer business expenses to 2026
2) Accelerate Personal income to fill up that 24% bucket – Convert Roth, Lump/Defer Charity, Exercise Stock Options, Recognize short term cap gains, Alter salary with other tax timing differences.
3) Other “Bird in Hand” perspective items - Recognize Long Term capital gains, Gift to Heirs now.
*Sources: CATO Institute, Brookings Institution, Tax Foundation
