The Tax Cuts and Jobs Act: What it Is and What An Extension Might Mean for You

As we move to a Republican-controlled Congress, there’s an increasing likelihood that the Tax Cuts and Jobs Act, passed in 2017 by the first Trump administration, will be extended beyond its current sunset date at the end of 2025.  

What is the Tax Cuts and Jobs Act? 

The Tax Cuts and Jobs Act (TCJA) was the largest tax code overhaul in three decades, impacting: 

Individual tax rates: The TCJA reduced individual federal income tax rates for almost every U.S. taxpayer. In general, those with higher incomes saved more on taxes than those with lower incomes. The top marginal rate dropped from 39.6% to 37%, representing significant savings for high-income earners.  

Child Tax Credit: Under the TCJA, the Child Tax Credit doubled from $1,000 to $2,000 per qualifying child under age 17. For higher-income families, it increased the income threshold at which the credit begins to phase out to $200,000 for single filers and $400,000 for married couples filing jointly. 

Business income benefits: The TCJA created a landmark 20% deduction for qualified business income from pass-through entities (like S-corporations, partnerships, and sole proprietorships), allowing business owners to deduct up to 20% of their qualified business income and reducing their top marginal rate on this income to 29.6%. The law also slashed the corporate tax rate from 35% to 21%, creating massive savings for business owners with C-corp structures. 

Standard deductions: The standard deduction significantly increased for single filers and for married couples filing jointly ($14,600 and $29,200 respectively in 2024). While many individuals with higher net worth still itemize due to significant charitable giving and mortgage interest, this higher standard deduction provides valuable planning flexibility, especially in years with lower itemized deductions or for tax planning with family members. 

Estate tax exemptions: The TCJA dramatically increased the federal estate tax exemption, doubling it to $11.18 million per individual in 2018 (adjusted annually for inflation, reaching $13.61 million in 2024). This change means married couples can now pass up to $27.22 million to their heirs free of federal estate tax. Should this exemption sunset in 2025, it could revert to approximately half the current amount, making estate planning a more urgent priority for higher-net-worth families.  

What’s Next for the TCJA? 

Though the TCJA is set to expire at the end of 2025, Trump’s plan calls for extending or updating a number of its provisions, including: 

• Maintaining the 37% top tax rate 

• Preserving the current tax bracket structure 

• Lowering corporate tax rates even further, from the current TCJA rate of 21% to 15% 

• Keeping the historically high estate tax exemption (or repealing estate tax entirely) 

• Enhance the child tax credit to $5,000 per child (it’s important to note this was part of the talk track of JD Vance, Trump’s running mate) 

Preparing for 2025 and Beyond  

Certainly, no one can predict at this moment exactly what will happen with the TCJA and its potential expansions. However, we recommend working closely with your advisor to understand the implications of a sunset or an extension of existing TCJA policies on your full financial picture. Some action items to consider include: 

Reviewing Your Business Structure 

If you own a business, evaluate whether your current structure maximizes TCJA benefits. If it doesn’t, you may want to consider restructuring should these provisions become permanent. 

Taking Advantage of the Estate Tax Exemption 

While the estate tax exemption may be extended under a Trump administration, there’s no guarantee that will happen. And with the current exemption at a historic high, this may be a good time to act on large gifts or trust planning. 

Evaluating Income Planning 

Trump’s proposed policy would maintain the current low federal income tax rates for individuals in most tax brackets, but again, it’s impossible to say with certainty whether his extension will pass. With that in mind, it’s worth considering whether you can pull income forward into the 2024-2025 tax year by accelerating bonuses, exercising stock options, or converting traditional IRAs to Roth IRAs. 

As we mentioned, it’s unclear as of this writing whether the TCJA will sunset at the end of 2025 or be extended under the new administration. If you have questions or concerns about how potential changes could affect you in the new year and beyond, don’t hesitate to get in touch with our team! 

Sources: 

Schubel, K. (2024, September 20). What is the Tax Cuts and Jobs Act (TCJA)? Kiplinger.com. https://www.kiplinger.com/taxes/what-is-the-tcja 

The 2025 Tax Debate: The Child Tax Credit in TCJA | Bipartisan Policy Center. (n.d.). https://bipartisanpolicy.org/explainer/the-2025-tax-debate-the-child-tax-credit-in-tcja/ 

Tax Cuts and Jobs Act: A comparison for businesses | Internal Revenue Service. (n.d.). https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-comparison-for-businesses 

The Harvard Law School Forum on Corporate Governance. (2024, August 5). Lessons from the Biggest Business Tax Cut in US History. https://corpgov.law.harvard.edu/2024/08/05/lessons-from-the-biggest-business-tax-cut-in-us-history/ 

Stalter, K. (2024, May 17). What is the standard deduction? CNN Underscored Money. https://www.cnn.com/cnn-underscored/money/standard-deduction 

Schubel, K. (2024, October 25). New 2025 estate tax exemption announced. Kiplinger.com. https://www.kiplinger.com/taxes/whats-the-new-estate-tax-exemption 

Cruz-MartÍNez, G. (2024, September 5). How Trump and Harris might handle expiring TCJA tax cuts. Kiplinger.com. https://www.kiplinger.com/taxes/election-impact-on-tcja-tax-cuts