The Future of the 2017 Tax Cuts and Jobs Act

Jarrett E. Hindrew, CFP®, ChFC®, CLU®, Financial Advisor

Given the impending expiration of the Tax Cuts and Jobs Act (TCJA) by the end of 2025 and the incoming Republican trifecta in the government, tax policy will be a key focus for the new Congress and incoming administration. Discussions surrounding a new tax bill are expected to emerge, potentially within the first few months of 2025.

The future scenarios for the TCJA, whether through extension, amendment, or sunset, have been uncertain due to the evolving political landscape. However, with a unified Republican government anticipated in 2025, it is probable that any forthcoming tax legislation will build upon the existing TCJA framework, with necessary modifications introduced by the president and lawmakers.

The upcoming discussions on tax policy will be crucial in shaping the direction of U.S. tax laws and regulations. The potential changes, adjustments, or extensions to the TCJA will impact individuals, families and businesses across the nation.

Additionally, extending the individual estate tax provisions of the TCJA could add an additional $3.9 trillion ($4.5 trillion with interest) to deficits through Fiscal Year (FY) 2035.1 It will be interesting to see how these developments unfold and how they will affect taxpayers moving forward. While the expectation might be for a straightforward extension of the TCJA, factors such as differing priorities within the incoming Congress and varying opinions on certain provisions like the SALT deduction could complicate the process. Negotiations are likely to occur, considering the diverse viewpoints within the Republican Party and across different states, indicating that any future tax legislation will involve discussions and potential revisions to the existing law.

The proposals put forth during President-elect Donald Trump’s campaign, such as eliminating taxes on Social Security income and overtime wages, and the radical notion of relying solely on tariffs for government funding, present intriguing possibilities for the future tax landscape.

The focus now shifts toward determining which aspects of the TCJA will remain unchanged, and which will be subject to alterations or further tax reductions in the upcoming tax legislation. The evolving tax landscape post-TCJA expiration promises to be dynamic and impactful, influencing the future direction of the U.S.

The TCJA significantly impacted estate tax planning for high-net-worth families by doubling the gift, estate and Generation-Skipping Tax (GST) exemptions. The exemptions increased from $5.6 million per person to $11.2 million initially, and by 2024, these exemptions rose to $13.61 million per person. This meant that households with net worths up to $27.22 million could potentially pass away without owing any estate tax. However, with the expiration of TCJA in 2026, the exemption is expected to reduce to around $7 million per person, potentially exposing households with net worths more than $14 million to estate tax liabilities.

The IRS regulations in 2019 clarified that taxable gifts made between 2018 and 2025 would be subject to the higher gift and estate tax exclusions effective at the time of gifting. This led to a surge in wealthy families establishing estate planning structures to take advantage of the increased tax-free gifting limits before the potential expiration of TCJA. While the Republican trifecta suggests the estate tax exemption may remain at its higher TCJA level for now, families no longer face immediate urgency to gift assets before 2025. It may be more beneficial for some estates to hold onto assets that wouldn't be subject to estate tax to receive a step-up in basis upon death.

Even though there's less pressure to gift assets immediately, implementing estate planning strategies remains crucial. Families subject to estate tax could benefit from transferring assets with high future appreciation potential into trusts to shield future growth from the estate. Residents in states with their own estate taxes might consider gifting or transferring assets for state estate tax savings, even in the absence of Federal estate tax exposure. These considerations underscore the importance of thoughtful estate planning strategies despite the potential changes in estate tax.

Other Notable Changes for 2025 Tax Year2:

• Estate Tax Credits: Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estate of decedents wo died in 2024.
• Annual Exclusion: Increases to $19,000 for calendar year 2025, rising from $18,000 in 2024.
• Standard Deduction - For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.
• Marginal Rates - For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:
• 35% for incomes above $250,525 ($501,050 for married couples filing jointly).
• 32% for incomes above $197,300 ($394,600 for married couples filing jointly).
• 24% for incomes above $103,350 ($206,700 for married couples filing jointly).
• 22% for incomes above $48,475 ($96,950 for married couples filing jointly).
• 12% for incomes above $11,925 ($23,850 for married couples filing jointly).
• 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).


• 401(k) Contribution Limits – For tax year 2025, the contribution limit increases by $500 to $23,500. The catch-up contribution limit for those older than age 50 remains unchanged at $7,500. However, due to the Secure Act 2.0, workers between 60 to 63 can make additional catch-up contributions of $11,250 in addition to the $23,500 deferral limit, allowing these taxpayers to defer $34,750 in 2025.