Understanding the Expiration of TCJA Provisions – Preparing for 2026

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced several tax provisions set to expire at the end of 2025. Here's what to expect:

1. Individual Tax Rates: Rates may revert to pre-TCJA levels, increasing the top rate from 37% to 39.6%.
2. Standard Deduction: The nearly doubled standard deduction could revert to pre-TCJA levels, adjusted for inflation.
3. Personal Exemptions: The suspension of personal exemptions may end, allowing taxpayers to claim them again.IRS
4. Child Tax Credit: The credit may decrease from $2,000 to $1,000 per qualifying child.The US Sun
5. State and Local Tax (SALT) Deduction Cap: The $10,000 cap may be lifted, allowing for greater deductions.
6. Mortgage Interest Deduction: Limits on mortgage interest deductions may revert to previous thresholds.
7. Miscellaneous Itemized Deductions: The suspension of certain deductions may end, allowing taxpayers to claim them again.
8. Alternative Minimum Tax (AMT): Exemption amounts may decrease, subjecting more taxpayers to the AMT.
9. Estate Tax Exemption: The exemption amount may decrease, affecting estate planning strategies.
10. Qualified Business Income Deduction: The 20% deduction for pass-through entities may expire.

Planning Strategies:

• Review Estate Plans: Consider gifting strategies to utilize the higher exemption before potential reductions.
• Income Timing: Evaluate whether to accelerate income or defer deductions to take advantage of current lower rates.
• Monitor Legislative Developments: Stay informed on potential extensions or changes to the TCJA provisions.

Engaging with a tax advisor can help navigate these upcoming changes effectively.