The Clock Is Ticking: How to Prepare for Expiring TCJA Tax Provisions

Taxpayers face a looming deadline for several key tax benefits enacted under the Tax Cuts and Jobs Act (TCJA). Many of the tax benefits introduced under the TCJA in 2018, which have provided substantial savings for individuals and businesses, are set to expire after 2025 unless Congress acts to extend them. These changes could significantly impact how you file your taxes, what deductions and credits are available to you, and even the amount of taxes you owe. With the clock ticking, it’s crucial to understand what’s at stake and take proactive steps to minimize your tax burden while these provisions are still in effect.

One of the most significant provisions of the TCJA was the near-doubling of the standard deduction. In 2024, the standard deduction stands at $27,700 for married couples filing jointly and $13,850 for single taxpayers. These amounts have made it easier for many taxpayers to claim deductions without itemizing. However, if this provision sunsets, the deduction could revert to pre-TCJA levels, cutting it nearly in half. To prepare, consider “bunching” deductions. By grouping expenses like charitable contributions or medical costs into one tax year, you can maximize their tax benefits while the higher standard deduction remains. To get more information about "bunching" deductions, please check out our other blog posts.

The Child Tax Credit is another area to watch closely. The TCJA increased this credit to $2,000 per child, with $1,400 of that being refundable. However, unless renewed, the credit will drop to $1,000 per child starting in 2026. Families that depend on this credit should plan ahead, especially if they’ve been using it to offset educational or childcare costs. Ensuring that your dependents meet all qualifying criteria for the current credit could save you significant amounts in the short term, and preparing for its reduction will help avoid financial shocks.

For small business owners and the self-employed, the TCJA introduced the Qualified Business Income (QBI) deduction, allowing eligible taxpayers to deduct up to 20% of their business income. This deduction is set to disappear in 2026, potentially increasing taxable income for many entrepreneurs. To make the most of it, ensure your income falls within the qualifying thresholds of $364,200 for married couples filing jointly and $182,100 for single filers in 2024. This might involve strategically managing business expenses or income. Consulting a tax professional can help ensure you’re leveraging this deduction effectively while it’s still available.

High-net-worth individuals should pay close attention to the estate and gift tax exemption, which the TCJA raised to over $12 million per individual. If this reverts to approximately $5 million in 2026, it could have significant implications for estate planning. Making larger tax-free gifts in 2024 or 2025 could help reduce your taxable estate while the higher exemption is still in effect.

Another key provision to monitor is the state and local tax (SALT) deduction cap of $10,000. While this cap has remained a contentious issue for taxpayers in high-tax states, it is set to expire alongside the other provisions. However, its future remains uncertain as Congress debates its renewal or adjustment. For now, ensure you’re claiming all eligible property taxes and state income taxes to maximize the deduction under current rules.

Reassessing your withholding and estimated payments is more important than ever. Small adjustments now can help you avoid underpayment penalties or an unexpected tax bill. The IRS adjusts income tax brackets annually for inflation, but the expiration of TCJA provisions may mean higher tax rates in 2026. Using the IRS withholding calculator or consulting with a professional can help ensure your payments align with your income and deductions.

Staying informed is essential as we approach this pivotal tax moment. Congress may choose to extend, modify, or let these provisions expire, creating uncertainty for taxpayers. By acting now, you can make the most of the current tax rules and prepare for a post-TCJA world. Whether it’s optimizing deductions, maximizing credits, or planning for long-term tax changes, taking proactive steps today will set you up for smoother transitions in the future.  For advice on how these expiring provisions might affect your taxes, reach out to us at info@mkhstaxgroup.com.