Thomas Bayer, Jr., CFP®, MT
Wealth Planner

The Tax Cuts and Jobs Act (“TCJA”), signed into law in 2017, represented the most significant overhaul of the U.S. tax code in over three decades. Intended to simplify the tax system, reduce tax rates for individuals and businesses, and stimulate economic growth, the TCJA brought substantial changes to the tax code. Many of these changes are set to expire, or “sunset,” at the end of 2025. Unless Congress acts to extend them, here are some of the key provisions that would revert and how they could impact you:

  1. Individual Income Tax Rates:

    • Current: The TCJA lowered individual income tax rates across all brackets and adjusted the income thresholds for these segments, with the top rate dropping from 39.6% to 37%.
    • If Reverted: Tax rates could return to pre-TCJA levels, meaning higher rates across most brackets, with the top rate going back to 39.6%.

  1. Standard Tax Deduction & Personal Exemptions:

    • Current: The TCJA nearly doubled the standard deduction to $12,950 for single filers and $25,900 for married couples filing jointly (2023), while eliminating personal exemptions. This change simplified filing for many but removed a key deduction that benefited larger families, altering the tax landscape significantly.
    • If Reverted: The standard deduction could drop, potentially decreasing by half to pre-TCJA levels, requiring more taxpayers to itemize deductions. Personal exemptions will return, necessitating taxpayers to account for these exemptions again.

  1. Estate and Gift Tax Exemption:

    • Current: The TCJA temporarily doubled the federal estate, gift, and generation-skipping transfer tax exemptions, allowing individuals to transfer larger portions of their wealth tax-free. The exemption rose from about $5.49 million per individual in 2017 to $11.18 million in 2018, indexed for inflation ($13.61 million in 2024). For married couples, this allows up to $27.22 million to be transferred without federal estate and gift taxes. This change significantly impacts estate planning by enabling greater wealth transfer with reduced tax liability.
    • If Reverted: The exemption could drop to approximately $5.49 million (adjusted for inflation), significantly increasing the taxable portion of large estates.

  1. State and Local Tax (SALT) Deduction:

    • Current: The current SALT deduction is capped at $10,000.
    • If Reverted: The cap might be lifted, potentially restoring the full deduction for state and local taxes paid, benefiting taxpayers in high-tax states.

  1. Corporate Tax and Pass-Through Business Deduction:

    • Current: The most notable changes on the business front came through the reduction of the corporate tax rate from 35% to 21%, marking the largest single-year corporate tax rate reduction in U.S. history. For pass-through entities, such as S-corporations, partnerships, and LLCs, the TCJA introduced a 20% deduction on qualified business income (“QBI”), significantly lowering the effective tax rate for many small businesses.
    • If Reverted: While the reduction of the corporation tax rate is permanent, the QBI provisions will sunset and this deduction will no longer be available, increasing the taxable income for owners of pass-through businesses.

Should the TCJA provisions sunset at the end of 2025, there are numerous strategies you can explore to help minimize the impact, including gifting, trusts, and charitable giving, among others.

We will follow up with more detailed information on potential solutions and keep you informed of legislation changes as they evolve. As always, we encourage you to reach out with questions or to discuss the strategies for your specific situation

The information provided is not intended to be and should not be construed as legal or tax advice or a legal opinion. Haverford does not provide legal or tax advice. You should contact your legal or tax advisor regarding your specific tax situation prior to taking any action based upon this information.