Tax Cuts And Jobs Act: Expiry Date Looms

The Tax Cuts and Jobs Act (TCJA) is a United States federal law that amended the Internal Revenue Code of 1986. It was signed into law by President Trump on December 22, 2017. The TCJA made significant changes to the tax code, including reducing tax rates for taxpayers across all income levels and increasing the standard deduction. Many of the individual income tax cuts and other provisions in the TCJA were temporary and were scheduled to expire on December 31, 2025, while some business tax cuts were set to expire in 2028. However, in 2025, Congress passed the One Big Beautiful Bill Act, which extended most provisions of the TCJA beyond their original expiration dates. The expiration of the TCJA provisions will have varying effects on taxpayers, with the richest taxpayers expected to be disproportionately affected.

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The majority of provisions will expire in 2025

The Tax Cuts and Jobs Act (TCJA) was passed by a Republican-led Congress in 2017. It was the largest tax code overhaul in decades, amending the Internal Revenue Code of 1986. The TCJA cut taxes for individuals and businesses, with the largest benefits going to the richest taxpayers. However, many of the provisions in the TCJA were temporary and set to expire at the end of 2025. This includes individual income tax cuts, such as changes to the standard deduction and increased tax credits for children.

The expiration of the TCJA provisions will result in tax increases for many Americans, with more than 62% of tax filers expected to pay higher taxes in 2026. The Congressional Budget Office (CBO) has projected that the expiration of the TCJA will add $4.6 trillion in deficits over 10 years. The CBO has also published estimates of the distributional effects of the TCJA expiration, with households in the top 1% expected to pay an additional 3.1% of their income in taxes.

There have been efforts to extend the TCJA provisions beyond their original expiration dates. House Republicans have written follow-on bills, such as the Protecting Family and Small Business Tax Cuts Act of 2018, which aim to extend the individual tax cuts and add new tax deductions for small businesses. In 2025, Congress passed the One Big Beautiful Bill Act, which extended most provisions of the TCJA. However, this has caused concerns among economists about the potential impact on inflation and the country's fiscal trajectory.

The future of the TCJA provisions will depend on the partisan control of Congress and the results of the 2024 presidential election. If Congress is divided, lawmakers may pass a bipartisan agreement to address the expiring provisions in a long-term or permanent way. On the other hand, lawmakers may also decide to extend the TCJA tax breaks by a year or two to allow more time for negotiations.

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Some individual tax cuts will expire in 2025

The Tax Cuts and Jobs Act (TCJA) was passed in 2017 and included several provisions that lowered taxes for individuals. Some of these individual tax cuts are set to expire at the end of 2025, including:

• Marginal income tax rates: The TCJA lowered marginal income tax rates across the board, including reducing the top marginal tax rate from 39.6% to 37%. If the TCJA expires, these rates will increase to pre-2017 levels.
• State and local tax (SALT) deduction: The TCJA imposed a $10,000 cap on the deductibility of state and local taxes. If this provision expires, all state and local property taxes, income taxes, or sales taxes in states without income taxes will be deductible, benefiting high-income taxpayers in high-tax states.
• Child Tax Credit: The TCJA increased the child tax credit from $1,000 to $2,000 per child under 17, and this amount is not adjusted for inflation. The maximum refundable credit also increased to $1,400 per child in 2018, adjusted for inflation to $1,700 in 2024. If the TCJA expires, the child tax credit will revert to the pre-2017 level of $1,000, resulting in a 25% decrease in its real value.
• Alternative Minimum Tax (AMT): The TCJA increased the AMT exemption amounts and raised the income levels at which the exemptions phase out, resulting in fewer taxpayers being liable for the AMT. If the TCJA expires, the AMT exemption for married couples filing jointly in 2026 will be lower.

While these individual tax cuts are set to expire in 2025, it's important to note that lawmakers could pass a bipartisan agreement or extend the TCJA tax breaks to allow for further negotiations. The expiration of these provisions will disproportionately affect higher-income taxpayers, with households in the top 1% expected to pay an additional 3.1% of their income in taxes.

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Business tax cuts will expire in 2028

The Tax Cuts and Jobs Act (TCJA) was passed in 2017 and included a range of tax cuts for both individuals and businesses. While some provisions of the TCJA, such as individual income tax cuts, were initially set to expire in 2025, many of the business tax cuts were scheduled to expire in 2028. This included the expiration of a 20% deduction for qualified pass-through income for sole proprietorships, partnerships, and S-corporations.

The act was designed to spur economic growth, reduce regulations, and foster a more business-friendly environment in the United States. It achieved this by cutting the corporate tax rate from 35% to 21%, capping deductions for state and local taxes (SALT) at $10,000, doubling standard deductions, and expanding the child tax credit. These changes were intended to benefit all taxpayers, with the largest benefits going to the richest.

However, the TCJA also increased the federal debt and disproportionately increased after-tax incomes for the most affluent. As a result, economists expressed concern that extending the expiring provisions would worsen America's fiscal trajectory and boost inflationary pressures, potentially adding $4.6 trillion in deficits over ten years.

In 2025, Congress passed the One Big Beautiful Bill Act, which extended most provisions of the TCJA beyond their original expiration dates. This included the business tax cuts, which will now expire in 2028. While the corporate tax rate cut was made permanent, the expiration of the TCJA in 2028 will likely lead to significant changes in tax laws for businesses.

The expiration of the TCJA will impact businesses in several ways. Firstly, the 20% deduction for qualified pass-through income will no longer be available. Additionally, the increased income thresholds for the alternative minimum tax (AMT) will expire, resulting in more taxpayers being liable for the AMT. The doubled estate tax exemption will also revert to its previous level. These changes will result in higher tax burdens for businesses and may impact their investment and growth decisions.

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The law has no official short title

The Tax Cuts and Jobs Act (TCJA) is a federal law in the United States that amended the Internal Revenue Code of 1986. It is also known as the Trump Tax Cuts. Notably, the law has no official short title.

The clause establishing the bill's short title was dropped after Senator Bernie Sanders (D-VT) filed an objection under the Byrd Rule to the Senate Parliamentarian, claiming the section was extraneous. As a result, the name "Tax Cuts and Jobs Act", while widely used, is not contained in the bill.

The TCJA was passed as reconciliation legislation, meaning it overrode typical filibuster rules and was passed by a Republican-led Senate with a simple majority of 51 votes. The law cut the corporate tax rate to 21% and lowered marginal income tax rates across the income distribution. For example, the top marginal tax rate was cut from 39.6% to 37%.

Many provisions of the TCJA were set to expire at the end of 2025, including individual income tax cuts and changes to the standard deduction. However, in 2025, Congress passed the One Big Beautiful Bill Act, which extended most provisions of the TCJA beyond their original expiration dates.

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The law disproportionately benefits the richest taxpayers

The Tax Cuts and Jobs Act (TCJA) was passed in 2017 and is set to expire in 2025. The law included various provisions that benefited taxpayers across the income spectrum, including individual income tax cuts, increased standard deductions, and expanded child tax credits. However, it has been criticized for disproportionately favoring the richest taxpayers.

The TCJA provided the largest benefits to high-income households and businesses, primarily through reductions in corporate and individual income tax rates. The corporate tax rate was cut from 35% to 21%, resulting in a significant increase in after-tax incomes for affluent households. While the goal of the legislation was to spur economic growth and create a more business-friendly environment, the impact on median wages and economic growth was modest at best.

One of the most significant ways in which the TCJA disproportionately benefited the richest taxpayers was through the reduction in marginal income tax rates. The top marginal tax rate was lowered from 39.6% to 37%$10,000 cap on the deductibility of state and local taxes (SALT), which primarily benefited taxpayers in high-tax states with higher incomes.

The law also included provisions that favored business owners and executives over average workers. For example, the TCJA provided a 20% deduction for qualified pass-through income for sole proprietorships, partnerships, and S-corporations. This deduction benefited businesses but did little to improve the economic welfare of low- and middle-income families. The extension of expiring provisions would further increase the fiscal gap and hurt working families, especially those with low incomes.

The expiration of the TCJA provisions will have a disproportionate impact on high-income households. According to estimates, households in the lowest income quintile will pay slightly more in taxes, while those in the top 1% will pay an additional 3.1% of their income in taxes. This indicates that the TCJA's benefits were skewed towards the richest taxpayers, and its expiration will help reduce income inequality.

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