Trump tax cuts set to expire – will you be affected?

(NEXSTAR) – With many of former President Trump's tax cuts due to expire next year, taxpayers may be wondering if there's anything they should be doing now to prepare.

Trump's 2017 Tax Cuts and Jobs Act (TCJA) increased the standard deduction, lowered the corporate and estate tax rates and increased the child tax credit, among other things.

While some people may be affected more than others, a number of tax breaks are set to expire at the end of December 2025 and revert to pre-TCJA rules.

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"As crazy as it may sound, December 31, 2025, will be here soon," tax attorney Adam Brewer, with AB Tax Law, told Nexstar. "If Congress doesn't take action to extend the cuts or pass new tax cuts, then the average American can expect to see their tax bill increase slightly in tax year 2026." 

Cap on state and local tax deductions

Some residents of high tax states like California, New York and Massachusetts could actually benefit thanks to the scheduled expiration of the $10,000 cap on state and local tax (SALT) deductions, Brewer said.

SALT allowed taxpayers to deduct certain taxes paid to state and local governments – including property taxes and either state income or sales taxes, but not both – on their federal income tax returns.

"The Tax Cuts and Jobs Act (TCJA) significantly increased federal standard deduction amounts (thereby reducing the number of taxpayers who itemize deductions) and capped the total SALT deduction at $10,000," according to the Tax Policy Center. "As a result, the share of filers claiming the SALT deduction fell to 9 percent, with the estimated revenue costs dropping to $13.5 billion in 2020."

The standard deduction will be roughly half of what is now, adjusted for inflation, if the TCJA expires.

Deductions eliminated by the TCJA include the mortgage interest deduction and most miscellaneous deductions, such as investment/ advisory fees, legal fees, and unreimbursed employee expenses.

"These 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," according to Joshua Youngblood, senior tax adviser with the Youngblood Group.

Tax rates and family benefits

If Congress fails to pass a tax bill in time, one of the changes that will affect the average American is the expiration of the TCJA's lower tax rates.

The Tax Cuts and Jobs Act lowered the tax rate for nearly all income brackets.

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"Those married filing a joint return in a 12% tax bracket ($22,001 to $89,450) will increase to 15%," Youngblood said, citing one example. "Those in a 22% tax rate ($89,451 to $180,000) will increase to 25% from 22%."

Families will also see the child tax credit, which was doubled to $2,000 under the TCJA, revert to $1,000 per child.

Small business owners

One of the major changes that will affect many small businesses and the self-employed is the elimination of the qualified business income (QBI) deduction.

The QBI "is a deduction of up to 20% for pass-through businesses such as partnerships and S corporations," according to Youngblood. "This also includes sole proprietorships."

Self-employed people who might qualify for the deduction include gig economy workers, artists, Etsy sellers, contractors, restaurateurs, freelancers and various small business owners, according to tax services company Jackson Hewitt.

One business-related TCJA change that won't expire at the end of 2025 is the flat 21% corporate tax rate. Before the 2017 tax code change the top rate was 35%, according to Youngblood.

What should I do now?

Despite the broad changes to the tax code, Brewer says he's not recommending that his clients put a lot of energy into planning just yet.

"When we have the results of the presidential election, hopefully in November or December of this year, then a clearer picture of future tax rates may begin emerge," Brewer told Nexstar. 

If the TCJA tax bill appears likely to expire, both Brewer and Youngblood say some taxpayers may want to realize any sizable investment gains before the tax rates increase.

"Given the complete dysfunction in Congress," Youngblood said. "I think it is wise to at least look at some planning in the event there are no changes."

Along with taking a look at any rapidly growing investments, Youngblood also recommends that business owners work with a tax adviser to review the structure of their businesses.

"Often, people think a C Corporation is only for large businesses, and that is not true," Youngblood said. "It can make sense for a small business."

Another planning opportunity, he said, is to create a plan to maximize QBI deductions before the deduction expires.

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