When 2025 draws to a close, so will many sweepers Republican tax breaks under Trump Created by the Tax Cuts and Jobs Act (TCJA) of 2017. While the legislation provided some Tax cuts on corporate profits Permanent and reduced individual tax rates expire on December 31, 2025, and will return to pre-TCJA levels.
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It largely depends on which party ends up controlling the White House and Congress after Inauguration Day 2025, changes to the tax code are coming. Whether the Republicans can keep the cuts, the Democrats reset rates or a divided government agrees to some kind of bipartisan compromise, taxpayers of every political persuasion will be affected.
In an op-ed for RealClearPolitics, Julio Gonzalez, CEO and founder of Engineered Tax Services, Inc. , from the “harsh reality” facing Congress.
“We are in a situation where many American families and businesses are hanging on by a thread. Letting the non-permanent provisions of the TCJA expire could be disastrous for our economy in general and the well-being of many working families,” Gonzales stated.
The TCJA has made a bunch of changes to the tax code, but here are three major tax tweaks you’ll need to consider before you return at the end of 2025.
income tax rates
Although it kept seven income brackets, the TCJA lowered tax rates across the board and restructured the brackets, making them more acceptable under the TCJA. Except for those who were at the 10% (those earning $11,000 or less) and 35% (those earning $231,251 to $578,125) of pre-2018 tax rate levels, all income tax rates fell when the new laws went into effect.
The top single tax rate fell from 39.6% to 37% under the provisions of the Tax Cuts and Jobs Act (single candidates make $578,126 or more), the 33% bracket fell to 32% ($182,101 – $231,250), and a bracket of 28 % to 24% ($95,376 – $182,100), 25% to 22% tranche ($44,726 – $95,375) and 15% to 12% tranche ($11,001 – $44,725).
These backslides in brackets will mean that every American will need to reassess their spending and tax returns to pay 1% to 4% more in personal taxes unless the benefits are extended, revised or made permanent in the next 28 months.
standard discount
Under the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017, and before January 1, 2026, the standard deduction for all filings is nearly doubled. This has led to fewer people tailoring discounts and opting for the standard discount instead.
The TCJA has dramatically changed the standard deduction amounts for individuals and families. The standard pre-2017 tax year deductions were $6,350 for single filers, $9,350 for heads of household and $12,700 for married couples filing together.
After the TCJA (tax years 2018-2025), these amounts have jumped significantly. The standard deductions for the 2023 tax year are $13,850 for individuals who are married or filing separately, $27,700 for married couples filing separately and surviving spouses and $20,800 for heads of household.
This change is intended to simplify the tax filing process for many individuals and families (Forbes estimates that 90% of taxpayers choose to claim the standard deduction). Claiming the standard deduction has allowed many to skip the complicated process of itemizing deductions and possibly reduce taxable income.
Real estate tax credits
American taxpayers who own large estates benefit from greater exemptions, and because this tax can have a significant impact on your beneficiaries, it’s best to plan for it in advance in your estate plan if you think your estate could result in this.
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The TCJA doubled the tax credit for real estate and gifts to individuals, from $5.49 million in 2017 to $11.18 million in 2018. Adjusted for inflation, the exemption was $12.06 million in 2022 and increased to $12.92 million in 2023. This means that it can An individual can now pass on up to $12.92 million in assets without being subject to federal estate or gift taxes. For married couples, this effectively allows for a combined exemption of $25.84 million.
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This article originally appeared GOBankingRates.com: The Trump-era tax cuts are set to end — here’s how much you’ll pay more
