When the Tax Cuts and Jobs Act (TCJA) was enacted, many of its provisions were designed to expire after 2025. While it remains uncertain whether any of these expiring provisions will be extended, several key changes have been made permanent over the years, continuing to shape tax planning for individuals and businesses. Here’s a look at what may be on the horizon and which provisions are here to stay.

What Tax Cuts Expire in 2025?

While not an exhaustive list, here are some notable provisions set to expire and how they could change in 2026 if Congress does not extend them:

• Higher Individual Tax Rates: The top rate will increase from 37% to 39.6%.
• 199A QBI Deduction Eliminated: The 20% deduction for qualified business income is set to expire.
• Standard Deduction Reduced: The deduction amount will be cut in half, making more income taxable.
• SALT Cap Removal: The $10,000 cap on state and local tax (SALT) deductions will no longer apply.
• Mortgage Interest Deduction Change: The loan limit for deductible interest will increase from $750,000 back to $1 million ($100,000 for home equity loans).
• Lower Charitable Contribution Limits: The cash donation deduction limit will drop from 60% of AGI to 50%.
• Pease Limitation Returns: Itemized deductions for high earners will be phased out, reducing tax benefits.
• Estate and Gift Tax Exemption Cut: The lifetime exemption will be slashed from $13.99 million (2025) back to the inflation-adjusted exemption in place at the time TCJA passed. It is estimated that amount will be approximately $7 million.

Which Tax Cuts are Permanent?

While much attention lately is on the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA), several key tax rules will remain in place beyond 2025. Here are some notable permanent changes.

• Inflation Adjustments: The TCJA introduced a permanent change to how income thresholds are adjusted for inflation in that these adjustments are based on the chained Consumer Price Index for All Urban Consumers (C-CPI-U). As a result, tax brackets will continue to be adjusted using a slower-growing inflation measure, potentially leading to "bracket creep" over time.
• 529 Plans for K-12 Education: Up to $10,000 per year can still be used tax-free for private school tuition, thanks to a permanent TCJA provision. Check out our blog How 529 Plans Can Help You Save for Your Child's College Education in 2025.
• Excess Business Loss Limitation: The Excess Business Loss (EBL) limitation restricts noncorporate taxpayers from using business losses exceeding $305,000 ($610,000 for joint filers in 2024) to offset nonbusiness income, with the excess carried forward as a net operating loss. This cap on large business losses, originally set to expire, has been extended through 2028. Our blog, Understanding the Excess Business Loss Limitation has the details.
• Roth IRA Conversions: Before the TCJA, taxpayers could undo a Roth IRA conversion if market conditions changed or they had second thoughts. Now, due to a change made permanent under the TCJA, once a traditional IRA is converted to a Roth, it’s permanent. To avoid regrets, taxpayers may want to wait until later in the year when their tax situation is clearer or convert smaller amounts over time to reduce risk. While Roth conversions can’t be reversed, taxpayers who accidentally contribute to a Roth IRA when they exceed the income limit can still recharacterize the contribution as a traditional IRA to stay compliant.
• Alimony Rules: The TCJA permanently eliminated certain tax provisions related to divorce. Alimony payments from divorces finalized after 2018 will remain non-deductible for payers and non-taxable for recipients.
• Medical Expense Deduction: Prior to enactment of the TCJA, taxpayers could only deduct medical expenses exceeding 10% of their adjusted gross income (AGI). The TCJA reduced this threshold to 7.5% of AGI. This lower threshold for deducting medical expenses is now permanent.
• ACA Individual Mandate: The TCJA permanently set the penalty for not maintaining health insurance under the Affordable Care Act (ACA) to zero for years after 2018. This penalty will remain at zero indefinitely.

FAQs: Tax Cuts Expiring in 2025 and Tax Cuts Likely to Be Extended

• What should taxpayers know about upcoming changes to the Tax Cuts and Jobs Act (TCJA)?
  Many individual and business tax breaks from the TCJA are set to expire at the end of 2025, which could lead to significant changes in how income is taxed starting in 2026.
• Could taxes increase in the future?
  Yes. If Congress does not act to extend current provisions, many taxpayers—especially high earners and business owners—may face higher taxes beginning in 2026.
• Are any TCJA benefits permanent?
  Yes. Some provisions will remain in place, including the rules around Roth IRA conversions, the lower 7.5% threshold for deducting medical expenses, and the expanded use of 529 plans for K–12 private school tuition.
• What is "bracket creep" and why does it matter?
  “Bracket creep” refers to the gradual increase in taxable income due to inflation adjustments using the Consumer Price Index for All Urban Consumers (C-CPI-U), which grows more slowly than traditional inflation measures. Over time, more of your income could be taxed at higher rates, even if your real purchasing power hasn’t changed.
• What can I do now to prepare for potential tax changes?
  2025 is a critical year to plan ahead. Reviewing your estate plans, retirement strategies, business deductions, and charitable giving now can help you take advantage of current tax rules before they potentially change.

We will keep you updated as legislation unfolds. Wondering how you can maximize tax savings in the meantime? Fill out the form below and we would be happy to connect you with the right person.