TCJA Evolution: Tax Themes Outlook

The Tax Cuts and Jobs Act (TCJA), implemented on January 1, 2018, during President Donald Trump’s administration, is currently set to expire at the end of 2025. If the TCJA sunsets, income, estate, and gift tax provisions are scheduled to revert to 2017 levels (adjusted for inflation) starting January 1, 2026.

Given the results of the 2024 election, it is widely anticipated that the majority of TCJA provisions will be extended, though with potential modifications. These developments are likely to dominate discussions on future tax legislation throughout the year.

Anticipated Tax Developments

• Individual Tax Brackets and Rates: It is expected that the TCJA’s lower tax rates and wider brackets will largely remain intact. The larger standard deduction is also likely to be extended, while personal exemptions will likely remain eliminated.

2025 Federal Income Tax Rates & Brackets

• State and Local Tax (SALT) Deduction: Currently capped at $10,000 per household, the deduction for state and local taxes —including income, real estate, and personal property taxes — will likely be a contentious topic. Lawmakers may debate raising or eliminating the cap. Any changes to the SALT deduction could also affect taxpayers’ exposure to the Alternative Minimum Tax (AMT), as the cap has reduced the number of households subject to AMT since its implementation. If the cap limit is increased or removed altogether, the impact may increase the number of taxpayers subject to AMT.
• Child Tax Credit: An extension of TCJA is likely to retain the existing $2,000 per child credit (up to age 17), with bipartisan support to potentially increase the amount.
• Alternative Minimum Tax (AMT): Currently, relatively few taxpayers are impacted by AMT due to an increase in the AMT exemption as well as the cap on SALT deductions and the elimination of personal exemptions — both of which are key AMT preference items. If the SALT cap is increased or removed, more taxpayers could become subject to AMT. However, an extension of the TCJA is expected to preserve the increased AMT exemption, minimizing its overall impact.
• Federal Estate/Gift Tax Exemption: The federal estate and gift tax exemption, currently at a historically high $13.99 million per individual (as of 2025), is likely to remain in place. While this reduces the urgency for accelerated gifting, it continues to provide opportunities to achieve long-term wealth transfer goals for select financial situations.
• Qualified Business Income (QBI) Deduction (Sec. 199A): The QBI deduction, which allows eligible taxpayers to deduct 20% of pass-through business income, is set to expire in 2026, which would increase the taxation of income for partnerships, S-corporations, and sole proprietorships. However, it is anticipated that this deduction will continue in some form, with the possibility of adjustments to the deduction percentage, particularly if corporate tax rates are reduced under new legislation.

Conclusion

As 2025 progresses, we anticipate our federal tax legislation to come into focus, presenting unique opportunities to optimize your tax strategy. To understand how these potential changes might impact your financial plan, we encourage you to reach out to your CAISSA team. Together, we can ensure your wealth remains structured for maximum tax efficiency in this evolving legislative landscape.