Friends,
The Tax Cuts and Jobs Act, a major legislative piece that was originally passed in 2017 with the goal of temporarily changing the tax code, will be much discussed as it is set to expire at the end of 2025 unless extended.
The following are among the items which would change if the TCJA is not extended and/or amended:
- The Standard Deduction will revert to half of the 2025 amounts ($30,000 filing jointly and $15,000 for single filers) in 2026 without accounting for inflation. Itemized deductions might become more relevant for many Americans again and something to explore with a tax professional.
- More taxpayers could be subject to Alternative Minimum Taxes again as more households would no longer be exempt. It is important to note that AMT is usually applied to high-income earners and high deduction individuals.
- Federal Income Tax Brackets would shift upwards for most individuals by an average of 3% for marginal tax brackets.
- The State and Local Tax Deduction cap of $10,000 would be lifted helping taxpayers in states and municipalities with higher local taxes.
- Unless the TCJA is extended, current estate tax exemptions will be cut in half, adjusted for inflation. The current exemption is over $26 million for a married couple; that would be cut in half.
Given that President-Elect Trump has campaigned in favor of broad tax cuts, there are high hopes that many or most of the provisions in the TCJA will be extended. However, there will be much discussion and negotiations around these topics. We will continue to monitor these developments as they progress throughout 2025. Let us know if you’d like to discuss how these items may affect you or your family.
Matt and Andrew