Trump wants to extend his 2017 tax cuts — and more. Here’s what that could mean for you.
During the campaign, President-elect Donald Trump promised to extend many provisions of his signature Tax Cuts and Jobs Act, a 2017 law that overhauled tax laws and provided financial relief to nearly all taxpayers.
Many of these provisions are set to expire at the end of 2025, such as current personal tax brackets and the standard deduction. If Republican lawmakers fail to pass legislation next year to extend TCJA reforms, more than 6 in 10 filers will face a tax increase in 2026, according to Analysis by the Tax Foundation.
While these dates may seem far away, passing a major tax bill before provisions of the TCJA expire next year represents a major commitment from Congress. In addition to extending the tax break, Trump has proposed a slew of additional tax cuts for everyone from tipped workers who have vowed to eliminate the tip tax to seniors who have pledged to eliminate the tax on Social Security income.
Duncan Campbell, head of tax for Baker Tilly’s private wealth practice, told CBS MoneyWatch that extending the TCJA will “keep people stable.” But “we might not see anything and wake up in 2026 to find everything is back to the way it was before the TCJA, and some people who haven’t thought about that are going to be like, ‘Oh my gosh,'” he added .
In the context of law firm tax planning with clients, Campbell noted that Baker Tilly is preparing as if provisions of the TCJA might expire at the end of 2025. This helps people protect themselves financially and avoid being caught off guard if Congress fails to pass an extension. .
“Be prepared as if everything is going down,” Campbell advises. “Something is going to happen with the TCJA, but before that happens, it’s going to take a full year for the new administration and the new Congress to get some things done.”
Here’s information about potential federal income tax changes in 2025 and how they may affect you.
Will Trump’s tax brackets expire?
Expiring Tax Cuts and Jobs Act provisions that could affect the largest number of taxpayers include the law’s tax brackets, which would revert to pre-TCJA thresholds if Congress fails to extend these changes under the 2017 law .
Another provision that could affect millions of taxpayers is the TCJA’s higher standard deduction. Under the tax code, the standard deduction is nearly doubled, providing greater income protection for more Americans. The standard deduction, which reduces a taxpayer’s taxable income, will In 2025, the tax amount is $15,000 for single taxpayers and $30,000 for married couples filing jointly.
But if that provision expires, the standard deduction would shrink to $8,350 for single filers and $16,700 for joint filers in 2026, according to the Tax Foundation. The personal exemption eliminated by the TCJA will be reinstated at $5,300 per filer.
What about the child tax credit?
If the TCJA is not extended, the child tax credit will also return to pre-TCJA levels in 2026.
The Tax Foundation said: “Under the TCJA, the maximum child tax credit will be restored to $1,000 and begin to phase out at an adjusted gross income of $75,000 for single filers and $110,000 for joint filers. , and the maximum child tax credit amounts under the TCJA are $200,000 and $400,000, respectively,” notes.
Some Republican lawmakers have warned of potential tax credit cuts, though they have largely voted against A bill earlier this year would expand the CTC to provide more relief to low-income families.
In a Dec. 11 statement, House Ways and Means Committee Chairman Jason Smith, R-Mo., advocated extending the $2,000 CTC.
“Raising a family is challenging enough without Washington ripping the rug out from under parents,” Smith said. “But that’s what will happen if Trump’s 2017 tax cuts expire next year.”
Will the $10,000 SALT deduction cap change?
The state and local tax (SALT) deduction allows taxpayers who itemize to deduct property taxes, sales taxes, and state or local income taxes from their federal income taxes. Before the TCJA, there was no limit on the amount people could deduct with SALT.
TCJA limits deduction to $10,000 regardless of whether claimant files as a single taxpayer or jointly as a married taxpayer – this measure widely criticized In areas with higher property taxes, such as many in the Northeast.
Since the tax law was passed, more and more people have been affected by the salt tax deduction cap due to increases in property values and local taxes. During the campaign, Trump vowed to scrap it $10,000 cap, and his economic adviser Stephen Moore said Thursday that the new administration Want to raise the limit to $20,000.
How likely is it that Congress will extend Trump’s tax cuts?
Republicans hold majorities in both chambers of Congress, as they did when Congress passed the Tax Cuts and Jobs Act in 2017. This significantly increases the likelihood of an extension of the tax cuts.
Meanwhile, economists and fiscal hawks expressed concern about the fiscal impact of the Committee for a Responsible Federal Budget’s extended cuts. estimate Extending all reserves could increase the deficit by more than $5 trillion through fiscal year 2035.
Trump campaign officials, for their part, have proposed cutting federal spending as a way to eliminate the nation’s growing deficit. Trump appoints billionaires Elon Musk and Vivek Ramaswamy to propose spending cuts, say their Department of Government Effectiveness (DOGE) plan Cut $500 billion In terms of cost.
However, DOGE is an advisory body, not a federal agency, and the organization’s effectiveness in reducing spending remains to be determined.
What should you do now ahead of possible tax changes in 2025?
Campbell recommends, if possible, preparing for provisions of the TCJA to expire next year. This would apply most to higher-income Americans, who are more likely to be affected by some of the changes.
For example, the TCJA nearly doubled the lifetime estate and gift tax exemptions (the amount people can give to others without paying taxes) to $13.6 million per person and $27.2 million for married couples. If the TCJA expires, income will drop to about $7.5 million per person and $14.5 million for married couples. according to to Fidelity.
Campbell said it’s a safe bet that the change won’t affect most Americans, but those with significant assets may want to plan ahead. “If you do nothing, you lose the ability to transfer another $7 million before that provision expires,” he added.
Another potential change is the expiration of the qualified business income deduction, which allows small business owners, freelancers and others who own their own businesses to deduct 20% of their income from their taxes. This tax break will expire at the end of 2025.
Campbell said small business owners should plan to set aside extra cash to pay higher taxes in 2026 if the deadline is not extended. “The law is the law today and it’s about to expire,” he said. “This should be the top priority in our planning.”
