Tax Planning For The Tax Cuts and Jobs Act (TCJA) Sunset
The law known as the Tax Cuts and Jobs Act (TCJA) of 2017, P.L. 115-97, included some major changes to the Code, but not all of them are here to stay. A number of significant provisions are set to expire after 2025. Although Congress may act to extend some or all of them, it is important to know which provisions are expiring so taxpayers can be prepared to maximize their tax savings in case the provisions sunset as currently scheduled.
Individual tax provisions to sunset after 2025
Individual tax rates: The TCJA lowered tax rates to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top rate decreased to 37% from 39.6%. These tax rates are set to sunset Dec. 31, 2025. The top tax rate beginning Jan. 1, 2026, reverts to 39.6%.
Standard deduction: The standard deduction was nearly doubled for all filing statuses ($12,000 for single filers and $24,000 for married filing jointly) by the TCJA. As a result, many taxpayers have not itemized deductions. Starting in 2026, the standard deduction will be about half of what it is currently, adjusted for inflation.
Itemized deductions: The following items were temporarily modified or suspended by the TCJA:
• SALT: The state and local tax (SALT) deduction was capped at $10,000, which had a significant impact on taxpayers in high-tax states. After 2025, this limitation will expire, allowing greater benefit from deducting taxes paid during the calendar year, including real estate taxes, state or local income taxes, and personal property taxes.
• Mortgage interest deduction: The TCJA generally suspended the home equity loan interest deduction. It limited the home mortgage interest deduction to the first $750,000 of debt (if married filing jointly) for any loan originating on or after Dec. 16, 2017. Beginning in 2026, the mortgage interest deduction will revert to pre-TCJA levels, allowing interest to be deducted on the first $1 million in home mortgage debt and $100,000 in a home equity loan.
• Miscellaneous itemized deductions: The TCJA temporarily eliminated most miscellaneous itemized deductions, such as investment/ advisory fees, legal fees, and unreimbursed employee expenses. These deductions will once again be allowed, starting Jan. 1, 2026, under the previous rules, to the extent they exceed 2% of the taxpayer’s adjusted gross income. Other individual tax item
