By Jackie Meyer, CPA
Key provisions of the Tax Cuts and Jobs Act (TCJA), from reduced individual tax rates to expanded deductions, are set to expire after 2025, and the stakes couldn’t be higher. Will your clients face a sudden jolt with rising rates, or will lawmakers act to extend the policies that have defined the last decade of tax planning?
When the TCJA passed in 2017, it was hailed as a game-changer, promising to simplify taxes, boost growth, and put more money in Americans’ pockets. Fast forward to today, and the tax landscape is on the brink of transformation once again.
Now, with President-elect Donald Trump back in the spotlight and pledging to make the TCJA permanent, this issue is shaping up to be one of the most contentious—and impactful—tax debates in years.
What made the TCJA so transformative?
The TCJA reshaped the U.S. tax code, introducing sweeping changes that touched nearly every taxpayer. For individuals, it lowered income tax rates across the board, with the top rate dropping from 39.6% to 37%. The standard deduction was nearly doubled, making it easier for millions of Americans to file their taxes without itemizing. Families benefited from a more generous child tax credit, which increased from $1,000 to $2,000 per qualifying child.
But not all changes were celebrated. The cap on state and local tax (SALT) deductions hit taxpayers in high-tax states particularly hard, while the elimination of personal exemptions complicated the equation for larger households. On the corporate side, the TCJA permanently reduced the tax rate from 35% to 21%, a move designed to boost U.S. competitiveness and encourage domestic investment.
Now, as the clock ticks toward the TCJA’s sunset in 2025, these provisions are at risk of disappearing. If that happens, taxpayers could see significant changes—and not necessarily for the better.
The expiration cliff: What’s at stake
Let’s start with the numbers. If the TCJA expires, individual income tax rates will revert to pre-2017 levels. For many taxpayers, that means higher tax bills. Households benefiting from the doubled standard deduction may find themselves scrambling to itemize again, while families relying on the expanded child tax credit could see their refunds shrink. In fact, experts estimate that without an extension, 62% of Americans would face an increase in their tax liability.
Business owners are bracing for impact too. The 20% deduction for qualified business income, a lifeline for many small business owners, is also on the chopping block. Without it, pass-through entities like S-corporations and partnerships could face significantly higher effective tax rates, potentially stifling growth and profitability.
For high-net-worth individuals, the expiration of the doubled estate tax exemption could upend years of financial planning. Estates over approximately $6 million (adjusted for inflation) would once again be subject to federal estate taxes, compared to the current exemption of around $12.9 million.
Trump’s push for permanence
Donald Trump has made it clear that extending the TCJA is a top priority. During his campaign, he outlined plans to not only make the individual tax cuts permanent but also expand on them. Some of his proposals include further reducing corporate tax rates, eliminating taxes on Social Security benefits, and even scrapping taxes on service workers’ tips. His pitch? More money in Americans’ pockets and a stronger economy.
Trump’s supporters argue that these measures would build on the economic gains seen during his first term. Critics, however, point to the price tag. Extending the TCJA could add $3.9 trillion to the national deficit over the next decade, fueling debates about fiscal responsibility and the long-term economic impact.
The political road ahead
Pushing through an extension won’t be easy. While Republicans are largely united in their support for making the TCJA permanent, Democrats are raising concerns about equity. Critics argue that the TCJA’s benefits have disproportionately favored corporations and high-income individuals, leaving middle- and lower-income households with a smaller share of the pie.
In Congress, these differing priorities could lead to a protracted battle. Democrats may push for modifications to the TCJA rather than a wholesale extension, advocating for measures that prioritize tax relief for middle-class families and small businesses. Meanwhile, Republicans will need to navigate the political tightrope of extending tax cuts without exacerbating the deficit.
What this means for tax professionals
For accountants, CPAs, and tax planners, the potential expiration of the TCJA represents both a challenge and an opportunity. Clients will need guidance to navigate the shifting landscape, from revisiting tax-efficient investment strategies to preparing for possible changes in estate planning rules.
Here’s where proactive planning becomes critical:
- Revisit tax strategies: For small business clients, consider the implications of losing the 20% pass-through deduction. Explore other strategies to offset higher taxes, such as retirement contributions or entity restructuring.
- Prepare for higher rates: If individual rates increase, high-income clients may benefit from accelerating income into 2025 or deferring deductions to offset higher taxes in future years.
- Estate planning overhaul: High-net-worth clients should review their estate plans now. With the estate tax exemption potentially dropping, gifting strategies or trusts could help mitigate future liabilities.
Looking ahead
The TCJA’s legacy is still unfolding, and its potential expiration could reshape tax planning for years to come. For tax professionals, staying ahead of these changes isn’t just about compliance—it’s about delivering value. By helping clients navigate uncertainty and seize new opportunities, you can position yourself as a trusted advisor in a time of change.
As lawmakers grapple with the future of the TCJA, one thing is clear: the outcome will affect millions of taxpayers and businesses. Whether the provisions are extended, modified, or left to expire, the decisions made in the coming years will shape the tax landscape for a generation. For tax professionals, now is the time to educate clients, refine strategies, and prepare for what’s next.
ABOUT THE AUTHOR:
Jackie Meyer, CPA, is founder and president of TaxPlanIQ, a provider of tax planning software for accounting and tax firms.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
