If people are going to panic about impending tax changes, I feel it’s more productive to know WHAT you are panicking about.
Herewith, is a list of some of the changes that would happen if the Tax Cuts and Jobs Act is allowed to sunset (as originally planned and signed into law) in 2026.
Below each change is a recommendation of how to prepare. Not all are serious so if you can’t tell the difference, add “Work on my sense of humor” to your 2025 list of resolutions.
- Tax rates: The top marginal tax rate would increase from 37% to 39.6%, with other rates also reverting to pre-TCJA levels
- To prepare you can plan to earn less money (not serious) or put more away in tax-deferred investments (serious).
- Standard deduction: For married couples filing jointly, it would decrease from approximately $30,725 to $16,525
- Get divorced (not serious) or ask your accountant if filing separately makes sense for you (serious, but usually not beneficial).
- Personal exemptions: These would be reinstated at about $5,275 per person
- No comment.
- Child Tax Credit: It would decrease from $2,000 to $1,000 per child, with lower income thresholds for phase-out
- Put your least favorite child up for adoption (not serious – you’d need to sell at least 2 kids to gypsies to make this work).
- State and Local Tax (SALT) deduction: The $10,000 cap would be removed, allowing full deductibility
- Move to a state that has more expensive property taxes (not serious).
- Alternative Minimum Tax (AMT): The exemption would decrease to about $110,075 for married couples filing jointly, down from $140,300
- Again, make less money (not serious).
- Estate tax exemption: It would decrease to about $14.3 million for married couples, down from $28.6 million
- Make sure your estate plan is up-to-date and flexible around what the estate tax exemption might be no matter what government is in power upon your death (serious).
- Itemized deductions: Miscellaneous itemized deductions would be restored, and the Pease limitation would return
- A lot of you who have enjoyed simpler tax filing will have to get used to the idea of itemizing deductions on your taxes again. Make sure you have a good CPA before the end of 2025 (serious).
- Home Mortgage Interest Deduction (HMID): The principal limit would increase from $750,000 to $1 million
- Take out a bigger mortgage! (not serious).
Tax law changes often in this country, so don’t get too comfortable with whatever you have today. Be flexible, continue working and saving and paying attention to your budget, and all will be well.
Sources
https://www.brookings.edu/articles/which-provisions-of-the-tax-cuts-and-jobs-act-expire-in-2025/
https://taxfoundation.org/blog/2026-tax-brackets-tax-cuts-and-jobs-act-expires/
https://tax.thomsonreuters.com/blog/what-to-know-about-tcja-expiration/
